The bailouts may be big profit-makers for the Federal Government.

[Clarkie1]

The aim is for the government to buy the securities at a discount, hold onto them and then sell them for a profit

The success of the program may hinge on the price at which the Treasury buys the mortgage securities. "The government could make a profit, a substantial profit," said Jaret Seiberg, a financial services analyst at the Stanford Group, a policy research firm. "The pricing mechanism is going to be central."

http://money.cnn.com/2008/09/20/news/economy/bailout_proposal/index.htm?postversion=2008092009

Also, the Feds may find AIG profitable as well. These deals might just erase a substantial part of the federal debt, making programs like universal health care and investments in energy more affordable.

[lostnotforgotten]

1. Have I Got Some Land For You - Sunshine, Salt Air, Critters Galore ...

eom

[InkAddict]

27. That property is in Flint, Detroit, and Cleveland, right? n/t

[rucky]

2. I call bullshit. Feelgood, sunshine up yer ass, bullshit.

Taxpayers won't realize a dime of profit.

Unless they're suggesting that the Government can run things more efficiently than a private entity?

[Clarkie1]

5. Well, yes the government can run things better, in this case.

Nobody but the feds can or would buy this paper, but it's not all bad paper. The banks are desperate to get liquidity and will sell it at a huge discount. Later on, the Feds can sell it when things settle at a higher price.

Looks like Obama's plans may get a real shot in the arm as far as affordability goes...

[Zenlitened]

3. It's all going to depend on what these securities represent:

Tangible property/legitimate businesses?

Or imaginary "wealth" and empty promises?

Stay tuned, taxpayers.

[Clarkie1]

7. A mix of both

It's also going to depend on how much a discount the Feds get them for...

[Zenlitened]

16. ... and also on whether the holders of these securitized debts...

... are permitted to slice and dice before they hand it over.

In other words... will they be permitted to keep the stuff backed by performing loans, and unload the stuff that's already failed?

If so, kiss goodbye any prospect of the taxpayers coming out ahead on this. We'll come out even further behind... because we will have not merely inherited but actually PAID CASH for worthless crap.

[SmileyRose]

4. The federal gubmint DOESN'T OWN ANYTHING.

Someone owns the treasury bonds and will reap any meager profits to be had.

[Clarkie1]

6. We are talking 700 billion in mortgage securitities, etc. NOT treasuries.

nt

[Pale Blue Dot]

8. What unadulterated bullshit.

You really don't want to live in the real world, do you? I read today's Wall Street Journal, and even THEY aren't buying this crap.

http://en.wikipedia.org/wiki/Cognitive_dissonance

[yourout]

9. I wonder were that idea came from?

[Clarkie1]

10. I think it could work, and I hope it does.

It will be a boon to the Obama administration if it does...

[ThomWV]

11. Is possible I suppose

You know those packages of risky debt that can't be sold off on the open market actually contain properties for which payments are being made right on time. No one has sat down and broken out the failed debt from these "tranches".

[Clarkie1]

12. That's the key....

These packages contain more good securities than bad, would be my hunch. After all, less than 5% of mortgages are failing.

Stay tuned...I'm trying to remember a classic buddhist story about things turning out much differently than expectations (the point being: good, bad, who knows?). Maybe someone knows it and can post it here.

[Zenlitened]

14. So the holders hang on to the good tranches...

... and unload the bad tranches to the taxpayer?

:shrug:

Hopefully, a few of the Congressional Democrats caught up in the headlong rush to craft this bailout know what a "tranche" is.

Optimism is a fine quality... but skepticism and caution have their merits, too.

[northernlights]

23. aaaah, the Buddhist farmer story...here's how it goes

There was once a poor farmer who had only a single horse, a mare. One day, the mare escaped and ran off. His neighbors came by to help him out and commiserate on his great loss. "How will you plow your fields now? Your family will starve for sure."

"Well, we'll see" said the farmer. 3 days later, the mare returned...and brought an entire herd of wild horses with her.
His neighbors came by to congratulate the farmer on his luck, and schmooze. "Now you are wealthy! How fortunate you are!!!!"

"Well, we'll see" the farmer replied. The farmer's son set out to break the stallion of the herd, was bucked off and broke his leg. The neighbors came by to commiserate and lend a hand. "Who will help you plant and bring in your harvest? Your family will starve!"

"Well, we'll see" the farmer replied. A week later, the Chinese army marched through the village and conscripted every able-bodied young man off to war, leaving behind the farmer's son with his broken leg. The neighbors came by to congratulate the farmer on his good fortune. "Our sons have been marched off to war and will die! How lucky you are your son was injured!"

"Well, we'll see" the farmer shrugged.

[HamdenRice]

22. That's exactly right. Most people don't seem to understand the paper isn't actually "crap"

Because the covenants in the mortgage backed securities are so stringent, they are deemed to be in default even though the vast majority of homeowners are paying on time.

Once they are in default, they can't be valued, and no one (banks) will buy them -- even though they are still quite valuable and could turn around and start paying at contractual rates in the near future.

[Tierra_y_Libertad]

13. Maybe they could turn all that bad paper they're buying into counterfeit $100 bills.

And, then pass a law making them legal tender.

[annabanana]

15. we are buy up all the bad paper.. the crap loans... the risk

and we're not getting a very good deal

$.05 on the dollar! not a penny more!

[Zenlitened]

17. I don't see why we should pay a single cent for bad paper...

... if there's no good paper mixed in with it.

Seriously, if the banks and investment houses are permitted to SELL us the junk and keep the potentially profitable stuff, then this is nothing more than a massive transfer of the taxpayers' cash.

And if that's what's needed to stem this crisis -- a transfer of taxpayer cash -- then let's transfer it DIRECTLY to taxpayers. To US. To people who will put that money directly to work in the real economy.

[burythehatchet]

18. Wish there was :steamin pile-o-crap: smilie

[Onlooker]

19. We're still paying for the S&L scandal

If I understand the issue correctly, that article ignores the interest on the debt and the fact that the government will need to sell securities at a loss in order to pay that interest.

The fact is we're still paying off the S&L scandal that, because of the weak dollar, are costing us more and more each year.

[northernlights]

20. Right. And Iraqi oil...

will pay for the war in Iraq. Uh-huh.

Personally, I plan to call my favorite senator, Susan Collins :puke:, and ask her why the fuck we should believe anything they spew after 8 years of nonstop lies.

[HamdenRice]

21. I agree. Oddly, the record of making profits on financial bailouts has been good

The federal government made money on the bailout of Mexico as well, in the same way -- by purchasing the relevant securities at a deep discount.

Moreover, because the federal government has the market power to influence the condition of the underlying mortgages (by assisting homeowners, for example), it can in a sense play both ends of this transaction.

If this works, I wouldn't be surprised if the federal government makes hundreds of billions on this.

The bailout of the S&Ls was one of the times that the federal government didn't make money on a financial bailout.

[killbotfactory]

24. That must be why no private company wants them

Private companies don't like to make money, so it's no wonder the Fed had to step in. :eyes:

[HamdenRice]

25. They won't buy them because of uncertainty about value

not because they are valueless. If the feds buy them for less than they are worth and eventually resell them, they will make money.

[InkAddict]

28. They won't hire them because they are uncertain about their value

> 40 years of age and rapidly losing confidence in the value of learning useful skills; < 30 years of age and still learning (mostly bad lifestyles that include guns, drugs, and virtual everything else because reality isn't profitable enough to support a marriage, a home, unindentured children, and community pride).

[fed_up_mother]

26. They're going to sell at deep discounts to their crony friends. Taxpayers are shafted.