Obama’s Toxic Rip-Off

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To add to Mata’s post yesterday Openmarket.com has a good description of Obama’s recipe for disaster.

Toxic Asset Rip-Off

That’s how analysts describe the trillion-dollar toxic-asset buy-up program proposed this weekend by the Obama Administration: “the president is putting forth his idea to have the Treasury become the new AIG. In order to get hedge funds to buy up toxic debt, Obama is proposing that the Treasury provide loans up front and insurance against potential losses on the back end. It’s what Paul Krugman called ‘heads I win, tails the taxpayers lose.’ By the way, it may cost another $1 trillion.”

The Treasury Secretary claims taxpayers won’t lose a full trillion, because the assets aren’t as worthless as their current market prices suggest. But if that’s true, why does he continue to insist on federal accounting rules that force banks to value their assets at the current depressed market prices? Either the accounting rules are right — in which case taxpayers will end up losing a trillion dollars — or they are wrong, amplifying financial panics — in which case the rules should be repealed, so that banks, not taxpayers, will be able to take the risk of holding the assets. (If these accounting rules, known as “mark-to-market” accounting, had been in place in the late 1980s, “every major commercial bank would have collapsed,” wiping out the economy).

The above is the cost of getting the government involved in issues the private sector should handle. Of course letting the private sector handle this is how a politician who believed in Capitalism would lead.

Meanwhile Obama’s former nominee for Commerce Secretary, Sen. Judd Gregg, just admonished Obama over his budget proposal:

This translates to a debt-to-GDP ratio that we have not seen in this country since the end of World War II, when we were trying to pay off war debt,” he said. “If you take all of the presidents from George Washington to George Bush, and add up all of the debt they put on the books of the American people, President Obama’s plan adds more debt than that.”

Sen. Mitch McConnell, standing with Gregg, warned Democrats against passing the budget along party lines and using budget reconciliation to pass sweeping new programs. “If you do it with no bipartisan buy-in at all, then you own the whole thing.”

Oh, they own it….all of it.

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Oh, they own it….all of it.

Agreed, Curt. 100%. That’s what makes this so interesting. Obama and the Democrats will get the blame — or they’ll get the credit, if, contrary to general expectations around here, they manage to succeed.

Note, however, that this is a burden that Obama is willing to assume. In fact, he’s done everything he can to paint the following picture:

“Here’s the deal, boys. I’m willing to listen. I’m willing to consider proposals to the contrary. Give me a proposal, and I’ll consider it. I went along with the alternative minimum tax “fix.” I went along with business tax breaks. But, when all is said and done, here’s what else I’m going to do. I hope that you’ll be with me, but, if you want to be with that guy Limbaugh, so be it. You can be with me on this, or you can be with him.”

Nothing fails like failure.

But nothing succeeds like success.

And we’ll all see what ultimately goes down.

But, either way, there will be a clear winner and a clear loser.

– Larry Weisenthal/Huntington Beach, CA

Clear winner and clear loser…. interesting concept, Larry. You always speak in these terms of political parties.

Allow me to suggest a more sobering reality. Did it ever occur to you that Obama/Pelosi/Reid can “win” by “remaking America” into the Euro-socialist nation they desire… which, of course, leaves the nation as the losers.

I really don’t believe there will be a ‘clear winner or clear loser’. I believe that Mr. Obama will find some boogieman to blame if – no – when he is the loser. Guess who that will be? He will blur the lines of reality with the same old BS he effectively teleprompts every day.

Tom in CA

Larry -your rationalizations have developed into a whole language. This language has no defined subject ,no defined action ,no object -its just yada yada yada.

This is also the lnguage of Obama. Does he ever really say anything?

It is not witty ,it has no air of authority , nor is it logical.

Aldous Huxley -have a laugh.

Obama acts as if he has infinite “political capital,” which is why he feels he can get away with saying “Blame it on me.” Of course the MSM and the fawning sycophants so far seem willing to extend Obama even more of this capital.

Unfortunately, I see only two possibilities here:

1) The economy picks up just enough for Obama to claim victory, which means more government intervention, larger taxes (or fees imposed by businesses to cover the costs of government taxation increases.) We won’t pay a dime in higher “taxes”, just higher fees.
The verdict: Obama wins; the American taxpayer loses.

2) Obama’s policies fail miserably, the economy plummets, and we spend 8 to 16 years in a massive depression.
The verdict: Obama loses; the American taxpayer loses.

Someone *please* tell me there’s anothe, rbrighter possibility!

Jeff V

Oh, they own it….all of it.

Ok, lets bring back the nuclear option. Why should the Senate Dems allow the Republican “obstructionists” (using old language from a bygone era) to block the so called Euro-socialist vision by ending the 60 vote rule. The Constitution does not call for the Senate to mandate a 60 vote majority for cloture. If you want them to “own it” then let the Republicans not filibuster anything and let it all go to an up or down vote.

No one owns it… we are all in this shit, and if you want to hang this economy on the Democrats then give them total control and shut the f- up until the next election. I don’t give a s— who is in power… they all better get their asses in gear and work it out.

Sen McConnell must go nuclear on this. He must have the support of the conference to say, if the democraps try to ram these far reaching changes without serious imput from repubs, then the repubs will shut down the Senate with every parliamentary provision at their disposal until the repubs are granted a meaningful seat at the table. No nominations will be acted on, no bills passed, nothing. That is the only response to this coup d’etat by the demosocialists.

McConnell is about the only good politician we have from KY and I also work for B of A so I am getting it from both sides, On the good front I have a Senator who is still trying to hold the line and on the other B of A was forced to take TARP money to bail out Merrill Lynch and not they are being cast as the bad guy in this. Now if we hadn’t of had raises and Bonuses frozen last year due to Country Wise they may have tried to tie that to us as well.

Either the accounting rules are right — in which case taxpayers will end up losing a trillion dollars — or they are wrong, amplifying financial panics — in which case the rules should be repealed, so that banks, not taxpayers, will be able to take the risk of holding the assets. (If these accounting rules, known as “mark-to-market” accounting, had been in place in the late 1980s, “every major commercial bank would have collapsed,” wiping out the economy).
———-

The are called Zombie Banks. They should have died a long time ago. Ask Japan how well it works out? (See: “Lost Decade”)

If it were not for the damage that the Democrat plan will do, I’d suggest the Republicans not sit down to get changes in. Otherwise the Dems will find some reason to place the blame of the failure on Republican amendments.