The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.
The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.
Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.
“will ensure that private sector participants share the risks alongside the taxpayer” – don’t count on that. The record shows that all risks are borne by the taxpayer and the financial institutions are bailed out. I’m sure the hedge funds are counting on that.
The economy will recover when the markets clear. In a healthy market buyers and sellers are allowed to come to an honest agreement on price in an environment in which value can reasonably be understood. The markets will clear when those who make up the market believe they understand how the components of the market can be priced and have confidence that contracts actually can be made with integrity and the enforceable expectation of compliance.
The Obama/Geithner PPIP attempt is predicated on setting up a faux market – one primed with fiat money based on vastly increased national debt. The pricing mechanism will remain flawed because the Congress and the Administration will insist on laying laying thier big, fat thumbs on the scale to assure favored groups are given undue advantage. Private money will continue to sit on the sidelines except as it is coerced by the heavy hand of government – invest it or lose it to closely targeted taxes. And any private money that is invested, should such investment succeed above and beyond what Congress considers to be reasonable will be subject to unconstitutional ‘ex post facto’ or ‘bill of atainder’ legislation. Precedent for this nightmare scenario is current news.
And the beat goes on ………….
Elections – General AND Primary – produce consequences. Courtesy of the 53% of voters who bought Obama’s ‘hopenchange’ bilge we are now being subjected to economic consequences that will be much greater and prolonged than they have to be for the markets to clear. But our current disaster will offer Obama the opportunity to capitalize on the situation to transform us into his favored European Socialist form of government by “not wasting a crisis to do what can’t be done otherwise.” Enjoy.
BTW, the stock market is up this morning in the wake of PPIP. This is not a market edorsement of PPIP. Don’t forget, markets hate uncertainty. A bad plan that defines an unproductive path is far preferable to the stock market than the fondest wishes of a rumormill’s uncertainty.
[i] The stock market is up this morning in the wake of PPIP. This is not a market edorsement of PPIP [/i]
Of course not. If the market goes up, Obama is a knave. If the market goes down, Obama is a fool.
Of course all sensible people hope this fix works. Irenaeus, since you seem to have roots in the financial industries, do you think this is a wise and/or sufficient plan? I would genuinely like to know.
Irenaeus, if you don’t like my analysis of today’s market, how about this:
“NEW YORK (MarketWatch) — The stock market’s latest bounce had the S&P;500 tallying its best three-day winning streak since late November, yet the CBOE Volatility Index — which measures uncertainty — edged only slightly lower, signaling ongoing wariness about the market’s direction.
“Typically, stocks and the VIX (VIX:VIX 43.00, -2.89, -6.3%) — which represents the market’s consensus view of the expected volatility of the S&P;500 over the next 30 days — move in opposite directions.
Pointing to the S&P;500’s 15% rise since hitting a 12-year low in early March, the VIX on Friday closed at 45.89, down less than four points since it closed at 49.68 on March 9.
“That’s literally three points lower; that’s a rounding error,” said Dean Curnutt, president, Macro Risk Advisors.”
You can find it at – http://www.marketwatch.com/News/Story/Story.aspx?guid=cb2930bd33964f6ca79dd97d9de11a5c&siteid=nwham&sguid=1H5wM-wbo0OhKsK7l-N7qg
I do disagree with your assertion; “Of course not. If the market goes up, Obama is a knave. If the market goes down, Obama is a fool.” Obama is neither a knave nor a fool, merely an economic naif in way over his head for which all of us are, literally, the poorer. Before you jump to reply, please note the recent columns of many formerly strong Obama cheerleaders who seem to have awaken to the smell of freshly brewed strong coffee. They seem to be finding Obama quite potentially lacking in our time of need. I’ll be happy to cut and paste their words should you be unaware of their recent epiphanies.
Elections – General AND Primary – produce consequences. We now are living the consequences of having 53% of our voters buy the ‘hopenchange’ bilge Obama was selling. Hopefully, we will survive the experience with our country intact in a form not too far removed from the wonderful institution given us by our forefathers. I have my doubts.