Ward on Words

The head spins trying to take it all in. The numbers. The spreads. The math. The odds. The payout. No it's not the odds of the filly winning the Belmont Stakes. It's a discussion of PPIP, the US government's private-public investment plan to unload the toxic assets from the balance books of the banks. Apparently the private organizations will do well under the plan. The public gets fleeced. At least according to Columbia University professor Jeffrey Sachs, in a post that I found on Vox. Here's his take on PPIP: "Specifically, the FDIC is lending money at a low interest rate and on a non-recourse basis even though the FDIC is likely to experience a massive default on its loans to the investment funds. The FDIC subsidy shows up as a bid price for the toxic assets that is far above $360 billion. In essence, the FDIC is transferring hundreds of billions of dollars of taxpayer wealth to the banks." And the reason Americans aren't marching ...

Stumbled across a frightening story in the Financial Times (sad when terror can be found in the pages of a financial rag, but these are those kind of days!) A couple of weeks ago, when writing in FT about the fed's Public-Private Investment Program, Lucien Bebchuk asked this question: "Should banks with large amounts of troubled assets be allowed to participate as managers or investors in funds set up under the US’s public-private investment programme?" I'm astonished that such a question is even being asked. Apparently, it is not merely rhetorical. According to Bebchuck, "media reports indicate that some such banks are considering participating in funds established under the administration’s programme." I've learned lately that Wall Street is an alternative universe, a place where bonuses are not rewards for successful behavior, but legal obligations bankrupt firms must honor no matter what. A place where great brains thought it would pr...