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Strategies & Market Trends : Moufassa's Lair
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To: GREENLAW4-7 who wrote (13639)3/23/2009 5:09:51 PM
From: moufassa7   of 13660
 
From John Hussman: "it appears the Treasury envisions allowing private investors to bid for toxic mortgage securities, but only to put up about 7% of the purchase price, with the TARP matching that amount-the remainder being "non recourse" financing from the Fed and FDIC. This essentially implies that the government would grant bidders a put option against 86% of whatever price is bid. This is only an invitation for rampant moral hazard, as it would allow the financing of largely speculative and highly inefficiently priced bids with the public bearing the cost of losses, but of much greater concern, it is a likely recipe for the insolvency of the FDIC, and represents a major end run around Congress by unelected bureaucrats.
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