The Obama Administration is putting the finishing touches on another big bank bailout. Called the Public Private Investor Partnership (PPIP), it is the brainchild of the Treasury Secretary from Wall Street, Tim Geithner. Under the plan, the government will give our money to hedge fund managers to buy "toxic" assets for more than they are worth. The banks that created these toxic turkeys will use the money from the sales to recapitalize themselves. Everyone comes out ahead except, of course, the taxpayers, who are essentially funneling money to hedge funds to buy bad assets for more than they are worth. The other bonus for the banks in this plan, as
Yves Smith points out, is that they get to avoid giving the toxic assets any real market value. Less transparency and more transfers of wealth from taxpayers to hedge fund managers.
So much for the "free market."
Yves Smith writes: "This is what readers ought to be upset about. The AIG bonuses are rounding error, and a done deal. This (the PPIP) is billions to avoid price discovery . . . "
$750 billion, to be precise–plus what remains of the $700 billion bank bailout Congress already approved.
Smith reports that the bailout will likely have two parts: a subsidy to the hedge funds that buy the bad assets, and another one for the banks that sell them, to make up for the low prices investors are willing to pay. It’s socialism for bankers and hedge fund managers.
