Thursday, April 23, 2009

Bloomberg: PPIP - Like 1929 Pool Scams

The administration's program to solve our financial crisis is a slight of hand fraud that will make TARP look like a good investment. While we waste our time with the PPIP program the collateral that supports the Toxic Assets is worsening and it is affecting assets that are not troubled. Without a program to re-write loans on a massive basis, we face an ever growing whole in bank balance sheets and bailout that will make us think AIG was a bargain.

The article is good, here is part of its conclusion:

"The main premise of Geithner’s plan is that the banks’ toxic assets are now priced at artificially low levels. As the federal bailout program’s Congressional Oversight Panel wrote in an April 7 report, “Treasury has not explained its assumption that the proper values for these assets are their book values,” rather than the prices unsubsidized investors would pay for them.

If Treasury’s premise proves false, we may end up looking back on the Public-Private Investment Program as an elaborate pump-and-dump game. Only this time, unlike with the pools that sucked in gullible investors during the 1920s, the big losers would be taxpayers -- who never had the choice of not playing."

Scott Dauenhauer CFP, MSFP, AIF