Geithner: Banking Stooge

Market Ticker - Karl Denninger...
Unbelievable - TurboTimmy is now writing opinion pieces for the Wall Street Journal!

No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk. Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small-business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated.

These actions were ratified and overseen by the NY Fed, of which TurboTimmy was President.

The depth of public anger and the gravity of this crisis require that every policy we take be held to the most serious test: whether it gets our financial system back to the business of providing credit to working families and viable businesses, and helps prevent future crises.

But even though we got drunk on excessive, too-cheap credit, the solution to this problem is more excessive, too-cheap credit.

You can't make this stuff up.  It is literally written in two successive paragraphs, and puts in bright relief just how "tone deaf" those who are "leading" in this crisis really are.

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.

Uh huh.

Who are going to be the buyers?  We get a hint here:

These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.

Uh huh.  That wouldn't include a little self-dealing would it?

See, this is where the rubber meets the road.  Over the weekend I made clear that I had figured out how to "game" this system, thereby putting a hard cap on losses for the banks and transferring the rest of the risk of failure to the taxpayer. 

Preventing this sort of fraudulent rigging of the market requires that those who are selling these assets be prohibited from participating in any way on the bidding side. 

If they're able to do so, they will rig the game and the taxpayers will lose.

As I made clear Saturday, if that happens it is my considered opinion that it will be no accident and the architects of this "scheme" (at that point it won't be a plan any more) will need to be grilled - and not in front of Congress either.

Such a scheme, if it transpires in that fashion, will be nothing other than raw theft from the taxpayer without benefit of any sort to society.  It will be an act of intentional, knowing fraud and in fact, in my opinion, high treason committed upon The United States.

As I noted Saturday, this plan has promise.  But it also has peril, and whether we realize promise or peril - benefit or destruction - is entirely dependent on whether or not the current "owners" of those assets are able to rig the bidding - one of the oldest forms of fraud in finance.

We The People will be watching Timmy.


Market Ticker - Karl Denninger...