Saturday, October 11, 2008

Ian Welsh On Hank

Welsh on Hank's plan:

Apparently Fannie and Freddie are to start buying 40 billion a month (20 billion apiece) of non-performing crap mortgage securites. This is Paulson's way to get things moving before his TARP fiasco is up and running, a way to spend more money than Congress gave him, and a way to make up for having to divert money from TARP to an equity infusion by buying preferred stocks.

200 billion was made available to Freddie and Fannie at the time they were placed
into receivership. This plan will blow through that in 5 months and that doesn't even cover the fact that, well, Freddie and Fannie had massive losses and the money was meant to cover those losses, not as a slush fund to buy up trash.

At this point I simply have no benefit of doubt left to give to Paulson or his cronies in the Bush administration. TARP never made any sense, and the rationale of supporting mortgage markets through this is transparently stupid. If the mortgage markets are having problem and Freddie and Fannie need to be used to support them, then buying up old crap mortgage securities is far less helpful than having them buy up new mortgages or mortgage backed securities.

Instead this seems designed to help Hank's friends offload trash, more than to clear a market blockage.

But, as they say in the tech business, I guess from the Bush administration's point of view, that's a feature, not a bug.
Nothing ever makes any sense with Hank until you realize it always somehow ends up with Goldman.

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