Rather than begin this blog tomorrow, April Fool's Day, I want people to realize this is about the truth...the stories we are not told...which is what makes blog reports valuable.
I can begin with the Timothy Geithner Public-Private Investment Partnership plan. The mission, which he decided to accept, is to take "toxic assets" off of bank balance sheets. I understand he will likely succeed but, perhaps, at the expense of taxpayers as the Treasury Secretary attempts to make banks solvent and bondholders whole.
Now, some of this is foreign policy because bondholders likely to lose money include other countries, such as Norway, Germany, China, etc., etc. Basically, the U.S. would have to say to bondholders, by our own greed, we just lost a good amount of your money.
All well and good, except they won't be happy. I don't care how powerful and influential the U.S. is, you don't want to make the entire world mad at you (although G. W. Bush did a good job of that). Therefore, Geithner has formed a plan to allow the big banks to start a "special purpose entity" to purchase "toxic assets" from their own balance sheets, losing only 7 percent rather than 50 percent or 100 percent. Clearing out the balance sheets for only good assets is part one.
The other part is having PIMCO and Blackrock, two bondholders with investments sitting at BofA, Citigroup, JPMorgan, etc., etc. (etc., etc. stands for places holding trillions of dollars in toxic assets) and purchasing those assets using "the plan" and losing 7 percent.
Understand, the U.S. government will have purchased 93 percent of these toxic assets--toxic meaning worthless assets. However, banks will enhance their solvency and bondholders will lose 7 percent compared to their eventual gain of being made whole.
Prediction: In lieu of nationalizing failed banks, the Treasury Department/Federal Reserve/Federal Government will find large bank investors, such as Citigroup, BofA, Wells Fargo, JPMorgan Chase, Morgan Stanley and possibly Goldman Sachs to purchase toxic assets of their own books. Also, PIMCO and Blackrock will want to get involved as well.
If you see that, then you know what's really going on here. If you don't, then I'm wrong.
In following with the truth theme, I don't take any credit for coming up with the reason that Geithner's plan will be successful--depending on your definition of success. You can read all about it at "MISH'S Global Economic Trend Analysis" at http://globaleconomicanalysis.blogspot.com/2009/03/geithners-plan-can-succeed.html
