The Geithner Plan is Just Another set of Derivatives
If you look at it closely, the Geithner plan to bundle the toxic assets and sell them to private investors is just another derivative investment. This time, however, the rules can be repeatedly rewritten by Congress after you've invested.
I don't think they will be accurately defining the risks so much as they will be putting a stop on the losses possible to private investors. As I've read it, if you buy one of these toads, the most you can lose is 10%. If it goes down more than that, the taxpayer eats the rest.
Err, well, not the taxpayer, but the Fed will print money to cover the rest.
2 comments:
Isn't the important difference that this time the risks will be accurately defined?
I don't think they will be accurately defining the risks so much as they will be putting a stop on the losses possible to private investors. As I've read it, if you buy one of these toads, the most you can lose is 10%. If it goes down more than that, the taxpayer eats the rest.
Err, well, not the taxpayer, but the Fed will print money to cover the rest.
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