Some readings II

Mass Hysteria Over AIG Obscures Simple Truths, by Michael Lewis

The banks are on spotlight. So are the financiers. But why are the peple who took out loans they couldn’t afford to pay and bought houses they didn’t have the right to own on the different side of things? They’re one of the millions who are completely outraged by the bonuses that are being paid out, in particular to AIG. Well, Lewis argues “the one thing you can do right now in Washington without getting an argument is to rail against the ethics of AIG’s bonus payment.” Excellent reminder to us all.

HEADLINE: Toxic Asset Plan Foresees Big Subsidies for Investors, by Andrews, Dash, and Bowley

Treasury Secretary Tim Geithner is expected next week to release the much awaited plan for the toxic assets.  And there’s brewing news that there will be a massive government subsidy amounting to as much as a trillion dollars to provide aid to private entities in buying the toxic assets from the big banks.  Due to the disconnect between the investors who dare not pay above the bottomrock price and the owners of the assets who are unwilling to sell at the fire-sale price, the government could end up subsidizing 1, through FDIC which would provide a low-cost loan of up to 85% of cost and 2, from the remaining 15%, the Treasury will shoulder 80% of that.  Only the 20% of the 15% will be funded by private investors. That’s as much as 97% from the government.  My only question is, with such a huge government involvement, would private parties be enticed to participate after they saw what Congress did this week?

JP Morgan Might Lose Dimon to A Geithner Flameout, by David Reilly

Ah, now this would be unfortunate for JP Morgan if this happens.  Though I highly doubt this would happen.  Jamie Dimon is too precious like a… diamond for the firm.  The best he can do is be a consultant of some sort to Treasury Secretary.


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