This boggles the mind. One prominent investor yesterday said he wouldn't purchase toxic assets from banks under Tim Geithner's public-private investment partnership (the cheerily named PPIP) plan because, among other reasons, it cheats the taxpayers in an obvious and uncomfortable way by making them pay the difference between the high price the banks sell the assets for and the low price investors pay for them. But you know who's okay with that? Banks who took TARP money!
Citigroup, Morgan Stanley, Goldman Sachs, and JPMorgan, the Financial Times is reporting, have all become interested in using the PPIP, the terms of which will allow them to buy and sell toxic assets to each other — assets which, of course, they are now allowed to value at a price beyond what they're worth. Representative Spencer Bachus had an appropriate response to this plan, we think, calling it "a new level of absurdity" and vowing to draft legislation against it. Allowing financial institutions to begin "colluding to swap assets at inflated prices using taxpayers’ dollars," he told the paper, is simply "gaming the system to reap taxpayer-subsidised windfalls." Or, as Clusterstock put it, it's money laundering. But oddly, the government seems totally onboard with it. "It is between a bank and their supervisor whether they are healthy enough to acquire assets," one unnamed Treasury official told the paper. We find ourselves actually hoping that whoever said that was high on meth. Because otherwise, what we're hearing is that the Treasury thinks that the only way to fix the economy is by letting the banks go back to engaging in the same shady behavior that got us into this. That doesn't quite sit right.