Banks are just going to take the 700 billion, give the taxpayers junk and once the banks engorge themselves with this money, they will just hold on to it and not loan anyone anything. Why not instead have the FED open up a special financial entity that will buy commercial paper from companies at nominal rates instead. Get rid of the middleman. Not like banks are going to put that money to use instead. This will fix the liquidity problem and segregrate the junk banks, let them fail and the strong banks will survive.
*thumbs up* Get together with Soro too. He looks for banks to invest after bailout. What he really should do is form his own bank and grab market share.
There's 800 billion of CP that has to be rolled over this quarter. What happens next year if this idea doesn't work? Better idea and I think I heard some of this on tv, I caught only some of it, but if you really are giving the government this much money, why not just have the Fed buy the toxic mortgages; then pool them geographically into ETF's and then sell them to investors. ie. California toxic mortgages into an ETF called CRAP with a yield. Florida mortage ETF will have its own, etc... I think the Fast Money guy talked about pooling them into regions but I'm not sure he talked about putting them into an ETF and selling them to investors. I only caught part of the segment.
It should work. Just need the government to fast track these guys to bank status. We are already doing this with GM/F/Chryslar. Why not expand the effort? Why is this better? It help the innocent healthy companies and left the cowboy wallstreet banks to sort out their own mess. What you suggest is the Paulson plan.
The majority of companies are fine and are paying the price because banks are shutting down lines of funding. The bailout will only help those banks/financial institutes that played casino and lost. They will not lend because they have so much junk in the trunk that they will just use the money to meet margin calls in the future. Sorry but helping a gambler meet margin calls at my expense is BS. Plus the Government will make a nifty profit and can use it for the deficit since the majority of companies do not default on these short term commercial paper instruments. Take this money, create a facility to buy CP at nominal rates and you will see the market and the economy get back on track. For the gamblers, oh well let them sink.
This is a good idea. The Gov't has become the largest Hedge Fund in the world, why not let them be the largest Investment Bank too! Maybe we can even lever some of these ETFs, just 2 or 3 to 1, nothing major, just to, you know, juice up the yield.
Frankly, at this point, it is not a question of whether we should do bail outs or not. We simplely can't afford it.