Demoskratos

It was blogged by Victoria McGrane of Politico.com that Treasury Secretary is likely to unveil the Obama administration’s new proposal to supplement or replace the TARP this coming week.

It’s reported that White House press secretary Robert Gibbs offered little guidance to reporters during his Friday press briefing.

“The most important thing as we move forward on this second amount of money to stabilize the system is that we do it differently than the way it’s been done before,”

Now this is a good thing since we lost $78 billionalready on the first $350 billion of TARP money given to financial institutions as uncovered by oversight by the testimony of Harvard Professor Elizabeth Warren, who is chairing the Congressional Oversight Panel for TARP.  Thanks for the investment advice Mr. Hank Paulson of former Goldman Sachs and ex-Treasury Secretary under GW Bush.

Further,

The administration is widely expected to announce some form of “bad bank” — an entity that would buy up the toxic assets weighing down financial institutions — most likely in combination with some form of government insurance against losses on other assets.

How to figure out what to pay for those assets, however, is still a topic of intense debate within the administration, said one business lobbyist.

Now this is bad.  Once again, we’re not following generally accepted accounting principles (GAAP) or following FASB’s recommendation to recognize impaired long lived assets and see them as some type of loss to shareholders.  It sounds like we’re going to put it in a container and leave it for posterity like insects who are likely to inherit the earth.  Didn’t Enron try something like this?

Lastly,

The stability plan is expected to include further capital injections into financial institutions.

In additional to the $50 billion to $100 billion commitment, Obama and Geithner will soon release a proposal to “strengthen and invigorate” the housing sector,

Now this is just getting downright ugly.  This is becoming complete interference of the free market system for the natural price discovery of assets such as real estate.  The government is artificially propping up banks versus forcing them to sell impaired assets or to write them down if they are of little to no value.  If they had to sell cheaply, it would attract buyers.  The more buyers, the prices will eventually go up.  A natural price would be found!

Further, the government wants people to buy homes at the same time at these inflated prices through purchase tax credits.  So what happens after the one time credit is used?  The people would still have to come up with the big paychecks month after month, year after year, to make payment on the loans which are based on artificially inflated prices.  So essentially, we will have endless rounds of bailouts and stimulus artificially propping up the market place given an unnatural pricing mechanism.

Lastly, can we really trust this large infusion of capital to be well used by banks and to be carefully watched over by our government?  Let me count the ways.

President Obama’s administration with newly appointed US Treasury Security Geithner is looking to announce plans in the near future to purchase “bad—or non-performing and illiquid—assets from banks“.

What might these “assets” be you may ask?

Recently Drew Griffin and David Fitzpatrick, on a special investigative assignment for CNN had revealed this about Silver State Bank in Las Vegas, Nevada.

So why is the US Government bailing out banks that have these bad loans? How will this save Americans from further foreclosures and job losses?

President Obama’s administration and Congress have yet to explain it to the American people how this is going to help and how it will be paid plus interest since the government doesn’t have a surplus.

Lastly, with this “hurry up offense” what other “stimulus” have been added by the 435 Congressional Districts and 50 states to this economic package?

The Republicans, despite President Obama’s efforts for a bi-partisan accord, are not buying it.  President Obama and Treasury Secretary Geithner want to use taxpayers money to buy toxic assets that no one on Wall St wants to touch.  What does Wall St know that President Obama and the taxpayer don’t know?

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