American Taxpayers Buying Bank Stocks
October 11th, 2008The eye atop the pyramid seems to be glowing a bit brighter than usual.
Via: Bloomberg:
U.S. Treasury Secretary Henry Paulson said the U.S. will buy equity “as soon as we can” in banks and other financial institutions to restore market stability and revive economic growth.
The Treasury is “working to develop a standardized program that is open to a broad array of financial institutions,” Paulson said at a press conference after a meeting in Washington of finance ministers and central bankers from Group of Seven countries.
The injection of equity would be aimed at sustaining banks and other financial institutions through the worst credit crisis in seven decades. Paulson declined to give a timetable or details about the purchases, and signaled that markets may be in for turmoil ahead.
“We’re going to do it as soon as we can do it and do it properly and do it effectively and right,” Paulson said. “Trust me, we are not wasting time; people are working around the clock to deal with this.”
A drop in home prices and illiquid securities tied to mortgages led to the collapse of some of the country’s biggest financial firms and to takeovers by the Treasury of American International Group Inc. and Fannie Mae and Freddie Mac, the largest U.S. mortgage finance companies.
Under the equity purchase program, the Treasury would not be involved in bank management, Paulson said. Equity purchases would take place alongside Treasury’s coming program of “broad” mortgage asset purchases, he said.
Paulson is in some really bad astrology right now. As Mark Twain said – better not to lie lest you don’t remember what you lied about (or something like that).
Working as fast as we can ha, ha, ha. He doesn’t say at what! All we need is a set of devil’s horns pasted on Paulson’s head.
Mr. Kash-n-kari isn’t even isn’t going to have confirmation hearings.
Who needs to attend to such details when you’re taking the money from the bailout offshore faster than you can count it.
http://www.democracynow.org/2008/10/10/bush_to_host_emergency_finance_meeting
And I should have added, who brewed up that last batch of kool-aid that American’s are buying bank stocks?
Stocks in a bank is to me right now is the penultimate oxymoron.
Plastic silverware.
This is just Plunge Protection Team stuff. What Paulson’s saying is that they’ll be using some of those trillion-dollar taxpayer funds to leverage financial (& undoubtedly other) stocks in an effort to stop the world securities market debacle.
That’s just par for the course anymore, but at the same time we should keep in mind that the entire market cap of, say, the US stock market is literally only a drop in the ocean compared to the bond/derivatives markets. So it would seem foolish to devote any resources there. But at the same time, the stock market is what makes the nightly news (and specifically the DOW — somehow America has been convinced to look at only 30 companies as being a indicator of the broader economy).
So this is a relatively cheap way to influence consumer confidence in the short run. It won’t stop the financial firms from hemorrhaging, but it’s a desperate attempt to restore some sense of orderliness. Again, only in the short run.
What frustrates me is that it yet again makes a clear case that the stock market is a rigged game, where a small handful of individuals play the “house”, and everyone else (even the so-called professionals) are betting against the house. Which as any gambler knows is a losing bet over the long term, and why I don’t feel anyone should participate in the stock market at all. Friday’s rally is a perfect example of Paulson’s mew PPT funds at work, and shows exactly why I detest the stock market — when the critical moves arise, instead of following a sound strategy you end up just struggling to second-guess how/when/where the manipulation is going to occur….