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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (33929)	3/24/2009 11:29:34 PM
From: Spekulatius	Respond to of 78751

Lewis head belongs on a platter for sure. he has destroyed much shareholder value before the ML takeover because he has been a serial acquirer before. There was Fleet , LaSalle and many others, all at huge premiums. he just can't help himself, if he sees something to buy, he needs to do it. That ML was one too many. Sort of a shame because he and his team are good operators.

To: Madharry who wrote (33929)	3/25/2009 12:27:16 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78751

re Geithner plan If i understand the basics and please correct me if im wrong. the govt will finance the bulk of the purchases of toxic real estate purchased by third parties from banks. Correct. The treasury will provide cheap financing (by leveraging their own borrowing capacity. Equity in each tranche will be 16% (1/6 leverage) and the treasury will provide equity alongside private investors. In addition, investors will have to pay some insurance (I assume it's going to be some percentage of the total sum per year) to pay for losses beyond the equity. Seems like a reasonable plan. private equity will provide expertise and some equity and make sure that the treasury does not overpay. This makes sense since the treasury does not have the capacity (and probably not the expertise ) to do the valuation for those assets. Insurance on the assets payed to the treasury will pay for some of the losses that are going past the equity layer (where the investors get wiped out). the treasury leverages it's cheap borrowing capacity and provides relatively cheap financing which ensures that private investors can pay more than otherwise possible for those assets and still make a profit. Of course in principle this is nothing than a huge SIV where in the end the treasury is still on the hook if things go terribly wrong. Also the construction entices private investors to make binary bets where either the payout is huge or it's a total bust. The relatively low leverage ratio of 1/6 is supposed to prevent that though.