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Breaking "Loop Hole in Geither Bank plan"

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posted on Feb, 22 2009 @ 12:38 PM
I understand this may be the first time some people come to this website should this come up on a google websearch but don't throw the baby out with the bathwater ....hear this out...why i believe the bank plan has a loop hole that covertly screws taxpayers.....

here is an article by the wall street journal which i found VERY misleading

i am attatching a copy of a reply i sent in the forum (but the thread is locked) so it did not get here goes.....

article quote

"The good news is that much of the risk will be borne by the banks' common and preferred shareholders and their long-term unsecured creditors -- as opposed to by taxpayers. This makes sense since shareholders and creditors were the ones who bet on banks in the first place. We'll also stop repeating the mistakes we made with Fannie and Freddie"

my statement

Misleading as usual.....

When Gov't gives Private investors 90% leverage (and does not require them to pay it back should they lose) they will have more incentive to overpay for this "Uncertain toxic debt".....the reason the gov't is doing this is because the Banks are not willing to sell this stuff at current mkt price....

journal quote

"And by the way, if banks want Uncle Sam to buy all those "toxic" assets, the government is now going to do it alongside private capital. These investors aren't going to overpay, so that game is up as well."

my statement

they entice Private investors to pay above mkt prices (coincidentally the only prices at which banks are willing to engage in "price discovery" by leverging up the private sector and NOT Requiring them to pay back loaned money on a loss (The Gov't/ taxpayer will eat that...thank you very much) . The losses will be born out by the common and preferred shareholders the Gov't /Taxpayers and smaller losses by some Private investors (while some make a killing) , meanwhile The Foreign Bond Holders will be made nearly whole (So they can keep *buying and financing our DEFICIT...* just like with fannie/freddie these creditors will make sure there risk is very limited

However i wonder wether this will not just be a smaller cherry picking opportunity for some insiders who can separate some trenches of ground beef from spoiled meat.......because while some Private investors may over pay....after all their goal is to make money OR **********unless there is some way the Private investors can "act" like they took a "loss" and still win (i.e assume the artifically high price they paid w/ gov't leverage was then the "current fair price" ........and then at some time period later compare that with the current (unleveraged fair mkt price) they can say....... well gee ....i lost money i don't have to pay the gov't loan back....BUT.....they can still sell it for more than what they paid (the amount of capital they put in) i.e 10 cents on the dollar...make a profit....without Paying the loaned money back (the taxpayer eats the difference)****

i would ask you to read between the ****'s again and see if this is indeed

1. a plausible loop hole driven by the greed of washington trying to game this bailout as another profit making opportunity for those in "the club" ..

2 .which also coincidentally makes foreign bond holders happy ( and they still buy our treasury debt to finance our deficit)

3. covertly scr%w the taxpayer (because the taxpayer is getting outraged) so they had to get cute with hidding scr%w job.....

anyone have an opinion that gets this type of stuff i would appreciate ghost....bueller

[edit on 22-2-2009 by cpdaman]

[edit on 22-2-2009 by cpdaman]

posted on Feb, 22 2009 @ 01:09 PM
Im not a banker, and my knowledge on the banking system is about as much as the next guys who has seen 30 youtube videos on banks.
With that said, I read your article, and I think this is some explosive news for the people. I dont see why they wouldnt have to pay it back? Regardless, they should be made to pay it back, win or lose.
Is the govt trying to piss us off to the point of revolt? seems like they are to me.

posted on Feb, 22 2009 @ 04:20 PM
no the gov't is trying to act like they are sticking up for the taxpayer....and you can fool most of the people most of the they WILL WIN.....and want to make a point to people like Rick Santelli not to rant about the coming rip-off as well.

the more i look at the "plan" the more it looks like a "loophole"

The first intellectual hurdle...... you need to jump thru to understand the SCAM is..2 realize they will try to measure the "original/current mkt price" as the price the private investors are willing to pay (when they can borrow 90% of the costs) and not pay the borrowed money back ....should they "lose" (just the 10% or so they put down) i.e should they not be able to sell it for higher price or later discover the MKT price is lower.

Next you can realize that the banks have no incentive to offload this stuff for cheap unless they think they will be shut down.....but that would just force them to fire sale the stuff.....and walla .....they would be insolvent...due to the markdown (loss they take) ....soooo

Say you can get investors to WANT to take a "loss".....just change the definition of a loss.........See they don't want to Win as much when your profit margin can be higher when you "lose".. because they would have to pay the loan back (should they win) and no body is going to pay higher than what

a. the banks are willing to sell for and
b. the private investor with gov't leverage is willing to .......

the banks would rather sit still then sell at a current mkt price (.25-.30$ is what the vulture capitaists paid for the bear toxic trench) because that would proove they are insolvent....SOOO as long as private investors know that when they try to sell the stuff to the next party (that the next party is never going to pay the same price W/O getting risk free gov't money that the private investors did ) so ....they would be booking a loss........thus no payback to gov't (gov't /taxpayer foots the bill) *****yet they SELL anyway because they only put (10 cents down on the 85 $ on the dollar that the banks will likely accept in a "flawed price discovery".......they can sell the stuff for .25-.30$ on the dollar still and they only lose the 10 cents they put up to the gov't a very high profit ( ROI)****** .

Q Will this get the banks to lend once they get $$$ from the gov't /investors and get this toxic crap off there books?(as well as guarantee foreign bond holders get a better price then they deserve)

A .......very selectively IMO..........not to joe shmoe with a low credit score and uncertain employment and business earnings outlook......but it may save shareholders from getting wiped out (thou earnings will be low going forward) as i don't THINK they will be able to restart the mkt for securitization....although this is certainly debatable and would give the entire economy ONE more dose of credit crack (which was a HUGE part of bank profits/revenue) ......but even if it doesn't revive the securitization MKTS to a large degree that is better than insolvency (from the banks/shareholders perspective) .....(and the gov'ts perspective that just want foreign gov'ts to keep buying treasury debt) . EDIT

again i need someone to check my logic.........

but when these huge losses are realized.....the dollar may be hit very hard (and the euro will be as well w/ all the EU's probems...hey ST UDIO got gold?

[edit on 22-2-2009 by cpdaman]

posted on Mar, 6 2009 @ 02:41 PM
Excellent post, and insights! I will be chewing on this one for a few the govenment is running a giant ponzi scheme itself!


[edit on 6-3-2009 by burntheships]

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