John Berlau suggests that mark-to-market accounting is partly responsible for the current financial meltdown because it forced banks to write down their assets even if they really weren’t worth any less if held to maturity.
Hank Paulson and Ben Bernanke believe that another Resolution Trust Corporation, armed with a $700 billion line of credit from the U.S. taxpayer, could resolve this crisis using market principles — reverse auctions for distressed assets, most likely.
Now Hank Paulson, formerly of Goldman Sachs, knows full well that the beauty of the market is that if you see an opportunity, you can make a profit. If mortgage-backed securities are currently undervalued due to some arcane accounting rule, you can bet that Paulson and Co. are all too ready to pounce. Taxpayers, get ready to profit.
Paulson’s plan is to buy those assets at 10 cents on the dollar and use all the credibility of the U.S. Government to strong-arm the economy back into functionality. It’s very likely that a year from now the RTC will be ready to sell back those assets to the market a year from now at, say, 50 cents on the dollar, factoring in default costs.
Let’s say that the new RTC spends only $500 billion in the next few months on assets sold to them by distressed banks. The RTC reaps a cool $2.5 trillion windfall in under a year. This is in addition to the enormous profits it’s already making off of Fannie, Freddie, and AIG. The Federal debt is sliced by 25% and President Obama generously extends his tax cuts to 99% of the people. Instead of FDR’s New Deal, we’ll be talking about Paulson’s Sweet Deal.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online