More Problems wth the Geithner's Trillion Dollar Plan

Not surprisingly, the about to be released Geithner plan to buy toxic assets is not only likely to be a sweet deal for P3's, but also for the banks involved.

James Galbraith thinks most of the paper picked up will be trash--which will mean a gift to banks--and, thus, the Treasury passing out gifts on both parts of this transaction.

Galbraith has a test for the bank paper to measure its quality:

... the way to determine whether Geithner's and the banks' stated view of the toxic assets has any merit, is to demand an INDEPENDENT EXAMINATION OF THE LOAN TAPES, particularly looking to establish the prevalence of missing documents, misrepresentation, and fraud. This can be done by a sufficient sample. If the tapes look bad, it will be very difficult to justify the bank/Treasury view that the RMBS actually have value, which is somehow not realizable on the marketplace today because of "liquidity shortages" or "fire-sale conditions." Maybe there actually was a fire.

Think about all this for a minute. You have junk paper that the banks will be glad to get rid of at an overvalued price. Geithner then wants some of the shrewedest guys on the block to buy this overvalued shlock. Are we talking major league hidden payoffs to the buyers or what? This is trillion dollar madness, but, hey, keep your eye on the $165 million in AIG bonuses, nothing to see at the trillion dollar level.