http://www.nakedcapitalism.com/2009/03/investor-on-private-public-partnership.html Excerpt 1: Say I am SAC Capital. I get to be one of the bidders on bank assets covered by the program. Citi holds $100mm of face-value securities, carried at $80mm. The market bid on these securities is $30mm. Say with perfect foresight the value of all cash flows is $50mm. I bid Citi $75mm. I put up $2.25mm or 3%, Treasury funds the rest. I then buy $10mm in CDS directly from Citi [or another participant (BOA, GS, etc)] on the bonds for a premium of $1mm. In the fullness of time, we get the final outcome, the bonds are worth $50mm. SAC loses $2.25mm of principal, but gets $9mm net in CDS proceeds, so recovers $6.75mm on a $2.25mm investment. Profit is $4.5mm. Citi writes down $5mm from the initial sale of the securities, and a $9mm CDS loss. Total loss, $14mm (against a potential $30mm loss without the program). U.S. Treasury loses $22.75mm. Great program. It's just a scheme to transfer losses from the bank to the taxpayer with an egregious payout to a middleman (SAC) to effectively money launder the transaction. You've also transmuted a $30mm economic loss into a $36.75mm economic loss because of the laundering. So it's incredibly inefficient. How did fraud and money laundering become the national economic policy of the US? One would have to be a criminal to participate in this. ***************************** Excerpt 2: Now, given that Congress doesn't want to authorize more money, Summers/Geithner are trying to misuse Fed/FDIC authority to hand out cash. This is illegal because the FDIC and Fed are authorized to lend, but not to hand out gifts/grants. Lending non-recourse undercollateralized is a gift/grant.