Saturday, October 4, 2008
Calculated Risk on HTM Pricing
Calculated Risk's 23 September 2008 post, "Hold-to-Maturity Pricing" I agree with, the link: http://calculatedrisk.blogspot.com/2008/09/hold-to-maturity-pricing.html.
"Well Mr. Bernanke, if buying the garbage stinking up the American financial system is such an opportunity why don't you partake in this adventure with some of your own capital? ... Why not call the new plan 'Opportunity USA', and get the best minds in the industry to run the entity, and entice Greenspan, Bush, Gross, and other proponents of the plan to invest funds. After all, under such an scenario it is not inconceivable that taxpayers dollars would start voluntarily rolling in to also invest. ... By Bernanke and Paulson's own admission the plan in question would not be successful if assets were purchased at 'fire-sale' prices. ... Which brings us to the crux of the situation: you cannot protect the financial system and the taxpayer at the same time", Brady Willett (BW) at Gold-Eagle.com, 24 September 2008, the link: http://www.gold-eagle.com/editorials_08/willettalway092408.html.
In concluded Henry Paulson's (HP) plan does nothing for taxpayers. If HP wants to keep his "clients" alive with public funds I suggest this plan. Uncle Sam buys say $10 billion of 10-year subordinated Goldman Sachs (GS) debt at prime plus 8%. GS will: cancel all outstanding stock options, not lobby for anything on Capitol Hill, agreeing to use no lobbyist for any purpose and surrender lawyer-client privilege in any dealing with any federal agency until the loan is repaid. Take it or leave it. If GS fails at least its common and preferred stock get wiped out before Uncle Sam loses a dime. Uncle Sam could make similar offers to other troubled firms. Take it or leave it, "An offer they dare not refuse". Alternatively, HP can offer to buy the troubled assets personally. He has $500 million. Let him spend it. How much money does that other "genius" Richard Fuld have? Between Paulson, Fuld, O'Neal, Gross, et. al., we might find enough money to fund the "plan" in addition to finding enough "brains" to profit from it. I note, the House passed the slightly altered Paulson plan.
Well said BW. Let's us American taxpayers renounce the wonderful profit opportunity the Paulson-Bernanke "dynamic duo" presented us. Let them make the billions or tens of billions.