You don't get it. Hank Paulson and company created this mess with the intention of dumping the consequences on the taxpayer. Paulson was at the helm of Goldman Sacchs when it pushed all asset backed securities garbage out into the market. His job now is to stick the taxpayer with the bill. He is not working for the taxpayers and he never was.

Going forward with such a plan without full transparecy is absolutely unacceptable. We also should have some form of accountability if the Treasury is going to play hedge fund. Maybe the Secretary should receive or personally pay, say, 0.01% of the profit/losses from this trading? I'm not kidding.

Pay for the assets contributed to the RTC using new US Treasury "RTC Notes." Make it known that the RTC will hold the contributed assets to maturity. Pay all principal and interest on RTC Notes with more RTC Notes.

Then, see what happens.

Alan — Thanks! It's fixed now.

This is a brilliant idea! Not only would it provide a check on the work of the TARP (in the regrettable but likely event that it goes ahead), but it would also open discussion about the valuation of such complex assets from which a lot could be learned.

Steve - Thank you for bringing up the subjects of leverage and maturity mismatch.

One thing that really strikes me about the level of the discourse taking place in the country right now is how opinion on the root cause of the problem has bifurcated along party lines, with both parties completely missing the point. Republicans are predictably blaming "irresponsible borrowers", and Democrats are predictably blaming "greedy predatory lenders". Meanwhile, almost everyone ignores that structural issues that allow such mistakes to threaten the entire system.

Let's say you have $1,000. You have the opportunity to buy an asset with a 10 year life that currently yields 6%. If you invest your money in the asset, you make $60/year. You get the bright idea that if you could borrow money for less than 6%, you can make a return that is limited only by your ability to borrow. You search high and low, and find someone willing to lend you $30,000, on a month to month basis, at 4%. You now have $31,000 in assets, $30,000 in liabilities, and $1,000 in equity. Interest income is $1,860, interest expense is $1,200, leaving a cool profit of $660 per year. Much better than the measley $60/year you could make without leverage.

Anyone with a brain can spot the potential problems.

1. You are financing a 10 year asset with 30 day liabilities. If, for whatever reason, you cannot rollover your financing at the end of the month, you're toast.

2. If the yield on your asset decreases, you're toast.

3. If the rate on your borrowings increases, you're toast.

4. If the market price of your asset falls, and your lender demands additional collateral, and that demand exceeds your $1,000 of equity, you're toast.

The proximate cause of the asset dropping in value or reducing its yield is IRRELEVANT.

If we build a bridge and construct the supports out of pot metal instead of structural steel, and the first car that drives across it causes it to collapse, we do not blame the car or its driver. Yet that is exactly what the vast majority of politicians, talking heads on TV, and, quite frankly, the imbeciles that make up the rank and file of this country, want to do.

What were the original estimates for a war with Iraq?


"Sen. Kent Conrad, D-North Dakota, the outgoing Senate Budget Committee chairman, issued a statement Tuesday saying "the reality is no one knows how much it will cost us to wage war with Iraq."

"Mitch Daniels' $50 billion to $60 billion estimate is as viable as Larry Lindsey's $100 billion to $200 billion estimate in September. So much depends on the duration and type of combat forces as well as the presence, duration and size of a peacekeeping force," Conrad said. "


hmmm...somewhere between 50 and 200 billion...

It's highly likely that the trillion dollar bailout will be at LEAST 10 trillion.