PPIP UPDATE - Treasury Gets 36% Return Buying Toxic Mortgages, Until You Read The Fine Print - Just 5.6%!
Scroll down for VIDEO
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Another taxpayer rip-off courtesy of Tim Geithner.
- The government’s return on its contribution to PPIP is around 5.6 percent when including the debt financing it provided and considering only realized returns, said Linus Wilson, a finance professor at the University of Louisiana, in Lafayette. Officials shouldn’t have allowed the funds to make $159 million in equity distributions based on paper profits.
- “This is irresponsible when taxpayers will be lending $14.7 billion of extremely low-interest loans” to the funds, Wilson said. “Dividends SHOULD NOT be paid until the private investors’ debt to taxpayers is paid in full.”
Besides being a taxpayer-leveraged gift to banks as their balance sheets improve with the artificial Geithner rise in MBS pricing, there is another more egregious downside, articulated yesterday by the anti-banking badass of the moment, Bill K. Black...
The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers' trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce.
The FASB's new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional "income" and "capital" at the banks. The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks.
The inflated asset values allow the Fed and the administration to ignore the Fed's massive loss exposure and allow Treasury to spread propaganda claiming that TARP resolved all the problems -- at virtually no cost.
William Black Calls on FDIC to Seize Bank of America
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DB here again. Now, on to the 1st-year success story of the P-PIP. It's a relatively small program and it's hard to imagine how it could have taken a loss with easy-money Bernanke, in the background, buying more than a trillion of MBS paper (it wasn't all Treasuries) over the last 18 months.
The problem, the fine print, has been made bold below.
“The first year has been out of the ballpark,” Jeffrey S. Phlegar, who heads the PPIP fund run by New York-based money manager AllianceBernstein LP, said yesterday in a telephone interview.
The Treasury is an equal equity partner in each of the funds and provided debt financing for the $29.4 billion program. The government has gotten $215 million of interest, dividend and other payments, and the funds have more than $1.5 billion in unrealized gains.
The PPIP fund managed by GE Capital Real Estate had the best return at 52 percent, the Treasury said. Oaktree Capital Management LLC, based in Los Angeles, had the lowest return at 19 percent.
The government’s return on its contribution to PPIP is around 5.6 percent when including the debt financing it provided and considering only realized returns, said Linus Wilson, a finance professor at the University of Louisiana, in Lafayette. Officials shouldn’t have allowed the funds to make $159 million in equity distributions based on paper profits, he also said.
“This is irresponsible when taxpayers will be lending $14.7 billion of extremely low-interest loans” to the funds, Wilson said. “Dividends should not be paid until the private investors’ debt to taxpayers is paid in full.”
The eight fund managers raised $7.4 billion from private investors, which was matched by the Treasury. Government debt financing totaled $14.7 billion.
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PPIP Explanation.
Tim Geithner stars in Leverage Me Tender -- demonstrating the danger of reliance on frog-backed securities. Very well-done Geithner comedy. Runs 1 minute..
Remember Geithner's famous P-PIP rescue program for toxic assets:
- "Along comes Timmy with a plan. He's the new kid America loves to hate. Some call him Socialist pinko punk. Others call him compromised, corporate shill."
More detail on the P-PIP:
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Oct 26, 2010 at 4:32 AM
Reader Comments (14)
Tim's secret war
Geithner eyes a weaker dollar to combat recession
http://www.nypost.com/p/news/business/tim_secret_war_FISPJFQLut7Gosdxj1LhRN
You probably haven't seen much of Treasury Secretary Timothy Geithner of late, not on television, not at this week's G20 economic summit, not at President Obama's side, not even playing one of his awesome games of tennis.
No, you see, the Treasury Secretary is at war, and it's a war he is determined to win and which the US consumer may be a casualty.
It's not about hearts and minds, it's about dollars and cents.
http://www.youtube.com/watch?v=htw7shWR3oU
I hope you decide to post this so that your readers can also be made aware of Obama's plans.
Hillary Clinton also discussed an enforcement mechanism attached to socializing healthcare.
Oh, if you say so Warren...http://news.yahoo.com/s/nm/20101025/bs_nm/us_berkshire_accounting
In an April letter, the SEC asked Berkshire why it was not recording write-downs on shares with $1.86 billion in unrealized losses, all of which had been in that position for at least a year.
Given the duration of those losses, the SEC said they appeared to be more than temporary and as such should have been written down.
In a detailed response, Berkshire Chief Financial Officer Marc Hamburg said most of the losses with more than 12 months' duration as of December 31 were concentrated in Kraft and U.S. Bancorp, shares it had acquired in 2006 and 2007.
Hamburg said that as of December 31, Berkshire determined both companies had enough earnings potential that their share prices would eventually exceed the original cost of the stock. It also has the "ability and intent" to hold the shares until they recovered, he said.
http://www.youtube.com/watch?v=GznG_rQT46E
Who is going to pay???
http://www.telegraph.co.uk/health/healthnews/8084841/Nurse-caught-on-CCTV-turning-off-paralysed-patients-life-support-machine.html
http://www.washingtontimes.com/news/2010/oct/25/france-says-strikes-costing-560-million-day/
http://blogs.telegraph.co.uk/finance/jeremywarner/100008334/jp-morgan-withdraws-threat-to-scrap-1-5bn-london-hq/
(well, the Queen, Mervyn King (Group of 30), Rothschild, and Bank of England)
To sit back hoping that someday, some way, someone will make things right is to go on feeding the crocodile, hoping he will eat you last - but eat you he will.
Ronald Reagan
"What's in a name? That which we call a rose
By any other name would smell as sweet."
Chrysler poised to receive U.S. technology loans
http://news.yahoo.com/s/nm/20101026/bs_nm/us_chrysler_loans
The blank check of bailouts stinks.
There's no place like home, there's no place like home...
Lest there be any doubt that the slippers did belong to the biggest cheat in Wall Street history, his initials "BLM" are embroidered on them in gold thread.
http://www.theaustralian.com.au/news/executive-lifestyle/madoffs-final-possessions-go-under-the-hammer/story-e6frg9zo-1225941551982
LEST we forget who Madoff really was...
Is Madoff the tip of a money laundering pyramid in Israel?
Madoff and Money Laundering
http://www.huffingtonpost.com/diane-francis/madoff-and-money-launderi_b_243460.html
(shout out to DB's favorite site...Huffpoison)
http://www.nps.gov/ner/gewa/
Just another one of truth's protective layers.