This is from Stan Hughes:
Denninger is predictably rather upset this morning -- I think I may try to get a jump on the competition and start printing up a few hundred thousand I'M A BOND VIGILANTE AND PROUD OF IT tee-shirts.....
(the following passage lifted from market-ticker.denninger.net )
Quote: "The Secretarys authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time"
This is clever and nobody in the mainstream media has figured it out. If you think the cost of this bill is $700 billion, you're wrong. The cost is actually infinite and the entire bill constitutes a giant money-laundering scheme.
Paulson can (and presumably will) buy up to $700 billion of these "assets", then sell them. Let's say he decides to buy them at 60 cents on the dollar and sell them for 10. You, the taxpayer, will eat the fifty cents, for an immediate cost of $350 billion dollars.
Having done so, he is then authorized to do so again, since the $700 billion is no longer on the government's balance sheet. In fact, he can do this without limit, other than possibly due to the federal debt ceiling, which of course Congress will raise any time we get close to it. Oh yeah, this bill does that right up front too. No need to bother with it the first time around. Folks, $700 billion isn't even close to the total cost of this monster.
If Paulson and his successor decide to, they could literally cycle all $5.3 trillion of Fannie and Freddie's debt through this scheme, potentially sticking the taxpayer for 20% or more of the total, plus as much private debt on various bank balance sheets as they can manage to nationalize until (and possibly beyond) the point where the bond market tells him to go to hell. |
