They're going to make a killing all right -- but they are going to make it by flipping the crap they're buying to the USG at double what they're scooping it up for
Check out this clause from the soon-to-become-law bailout bill :
(e) PREVENTING UNJUST ENRICHMENT. In making purchases under the authority of this Act, the Secretary shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section, including by preventing the sale of a troubled asset to the Secretary at a higher price than what the seller paid to purchase the asset. This subsection does not apply to troubled assets acquired in a merger or acquisition, or a purchase of assets from a financial institution in Conservatorship or receivership, or that has initiated bankruptcy proceedings under title 11, United States Code.
That's why WFC leapfrogged C on the WB assets this morning -- they need to be the acquiring party in order to get in on the gravy train -- JPM already had the best seat taken when they bought WM
It's just a flip, and they are flipping it to you -- but you don't have any say in how much you're going to pay for it, the flipper does -- they get to assign a fantasy valuation on what they bought. That means they will be able to (a) show instant paper profits on their new acquisitions, and then (b) dump that paper on the USG at the phony valuation for cash, because they're exempt from clause (e) which would otherwise prevent them from marking the paper up
So we're talking "no lose" for a small handful of bankers who, with the reduced competition, will now have an even bigger stranglehold on the industry than they did before, and they will all be beholden to Paulson, and I expect the Republican party for many further years to come
Think of it as one last raid on the Treasury while they still can, I'm sure that's how they look at it
I hope the citizens storm the gates one day, they certainly have every reason to |
