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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (10366)	10/22/2008 4:18:38 PM
From: Hawkmoon	1 Recommendation Read Replies (1) \| Respond to of 33421

Gotta disagree with the following: The bailout will have a cost of $700B, but there is no way that we can get $700B of benefit since it will have to go through the government bureacratic machine and that costs money. What I understand that we're doing is buying LONG-TERM assets that have been unfairly "marked to market" due to private market failure and inane FASB accounting requirements. The majority of these assets are still performing (as in paying interest) but due to the lack of market liquidity, no private entity desires to purchase them for fear of catching a falling knife. The $250 Billion the Treasury injected into the banking system, in the form of preferred stock, is paying 5% and will pay back 9% after 5 years if the banks do not pay it back. Now.. if the remainder is used to buy out depreciated, BUT PERFORMING, assets and possibly restructure them (including assisting home owners to escape their treacherous adjustable rate mortgages tied to LIBOR, it's possible that over the longer term the government will reap a greater return than they would for just selling treasury debt. That's the taxpayer investing in assets that the private market is no longer willing to do. It sets a tremendous floor under those distressed markets and creates a motivation for the private market to rethink their value. Hawk