Wednesday, March 4, 2009

Another Big Score for Goldman?

Simon Johnson writes:
On p.A4 of today’s WSJ, Deborah Solomon and Jon Hilsenrath report more detail on the Treasury’s “Bad Bank” funding plan.  On first (and third) read I’m not impressed, but we’ll go through all the available details and report back later.

For now, I just have one question.  Isn’t this essentially the same plan that Goldman Sachs has been shopping around for the past month or so?  There’s nothing necessarily wrong with that, of course.  But it would be a huge win for Goldman and Lloyd Blankfein - explaining, for example, the confidence displayed in 
his recent FT article

And, whatever the reality of lobbying, pressure, and idea exchange here, the optics (as they say in the message spinning business) don’t look great.
What's the deal all about? Goldman, and the like, will get to borrow billions from the government to buy distressed assets at a huge discount and, get this, "To encourage participation, the government would try to minimize risk for private investors, possibly by offering non-recourse loans."

Borrow billions to bet on a turnaround on bad assets by buying them. If things do not turnaround, there is no hit to the borrower, since the loans are non-recourse. Nice.

I have to start hanging around bars near the Treasury, so I can run into the Treasury guys that can set me up on one of these oligarch plays. I'm ready.

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