Friday, April 3, 2009

Toxic Default Swap Dot Com

This is spectacular.  I knew we weren't the only ones to have this sort of idea.

US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury's $1,000bn (£680bn) plan to revive the financial system.

Your underwater, I'm underwater, but for a 7% upfront fee we can swap toxic sludge and stick the Treasury with the problem.  Brilliant.

By the way, this is the perfect counter-argument to those who are saying that the Geithner plan subsidy makes no difference.  If the subsidy was fine, then this horse trading should also strike you as fine. 

My new economic prediction is for another couple of years of this smoke and mirrors bullshit, rising unemployment, falling asset values, bigger stimuli, mild deflation, Japanimation -- and then a collapse of the dollar into hyperinflation 3-5 years down the road when both foreigners and Americans cease trust the US government at all. 


adamski said...

If they are planning on continuing the charade then why are they asking for massively expanded Resolution Authority?

Is it just to wind down AIG but leave everyone else standing?

Clark said...

More authority = less transparency maybe?

Option B is that they are just playing dumb for a while for political purposes (to avoid accusations of socialism and fool the bank into thinking they are going along) and then they are going to wield the axe. But they sure are faking it well if so!