The Unsinkable brian cork™

Brian Patrick Cork is living the Authentic Life

Lending Banks Money

October2

The “Paulson Plan” essentially means we give the banks money to bail them out of their bad decision-making. 

However, many banks may not participate in the Troubled Asset Relief Program portion of the plan because they haven’t had to write down as much assets under accounting rules -meaning decisions to sell into the program would cause them to lose capital. /1

“Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment,” /2

– Jeffrey Rosenberg, Bank of America’s head of Credit Strategy Research

Ironically, Investment Banks like Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies, while many banks see limited aid (according to Bank of America Corp.).

This feels like a ruse to indirectly rescue Wall Street (which remains our biggest problem).

In any event…

The Plan that failed Tuesday called for each tax payer will be saddled with approximately $2300 in debt after we cough-up $700 billion.  After interest it looks more like $6900.

I don’t run my personal or business finances this way, and I don’t like the notion of having this debt shoved down my throat.

I would prefer to lend the banks (okay… the investment banks) money, and have them pay me back with an interest that equates to the Dow Jones Industrial Average’s performance over the same period.  Or, give me DJI stock (better yet – options).  This means we directly share in the profits that the investment banks will certainly derive from this strategy. /3

Peace be to me Brothers and Sisters.

Brian Patrick Cork

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1/ Designed to remove “illiquid assets” clogging the financial system, reverse declining asset values and prevent the freezing of lending for U.S. financial firms, companies and consumers.

2/ I think Rosenberg assumes the government will use a reverse auction in which banks submit the lowest prices they are willing to sell certain types of assets for and then the government buys the cheapest ones, with the goal of “protecting the taxpayers”.

3/  There have not been this many market opportunities in almost seven (7) years

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