Friday, 3 April 2009

Latest version of pass the toxic parcel

For a crisp overview of the latest twist to the effort to keep the toxic assets moving along a tightrope with the public sector acting as the safety net this article is worth reading.

The whole thing is totally void of the kind of transparency and Democratic decision making you might've expected from this administration. At least to many of us, it looks like the bailouts are designed to simply restore the old financial order, while letting certain favored parties like PIMCO reap a windfall (when in fact they ought to be taking a severe haircut).

This undermines the whole effort. At the core of any financial system has to be trust -- trust that when you put money with someone, they'll actually keep it there and give you a proper accounting of what's happening to it. Without that, the whole business is shot and can become insolvent overnight.So sure, you can boost a company's tangible common equity or play around with regulations so that their books like tolerable. But by following the path of the Bush administration, Obama and Geithner threaten to undermine the core of the whole system.

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