Why would a smart guy like Hank Paulson advance such a dumb, shady plan? (Bloomberg)

[chill_wind]

"As of yesterday, Morgan Stanley Chief Executive John Mack owned 2.75 million shares of his company's stock, valued at about $67 million. If Mack can get Morgan Stanley to trade reams of sketchy paper for billions of dollars of our Treasury's cash, without diluting any of his stake in the company, who benefits?

Paulson would have us believe it's you."

Paulson's Reasons for Delaying Day of Reckoning

Commentary by Jonathan Weil

Oct. 2 (Bloomberg) -- If you think this bailout is expensive, just wait until you see the next one.

The $700 billion rescue plan approved by the U.S. Senate won't fix the core problem with the nation's ailing financial institutions. And it almost guarantees that you and I will have to pony up for an even costlier bailout someday, maybe soon, if the House of Representatives passes it tomorrow.

Treasury Secretary Hank Paulson has correctly identified the quandary: Lots of shaky banks and insurance companies are showing strangely high values for assets that aren't worth squat in the market. Many need more capital and can't raise it. And he's right in saying the outlook is grim if we don't get this fixed.

What's stunning is how little the taxpayers would get in return for their money under Paulson's package, and how illusory much of the banks' newly minted capital would be.

Under the plan, Treasury would buy some companies' troubled assets at above-market values. To boost their capital, Paulson would have to pay the companies more than what their balance sheets say the assets are worth. Then other companies would use the rigged prices to write up, or avoid writing down, the values of similar holdings on their own books.

So, the taxpayers get hosed on the asset purchases. Other banks use the trumped-up prices to cook their books. And investor confidence supposedly is restored.

That brings us to this question: Why would a smart guy like Hank Paulson -- the former boss of Goldman Sachs -- advance such a dumb, shady plan? Let us count the reasons:

link: http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_weil&sid=aMaWyNFImi4o

[BrklynLiberal]

1. THAT is why this bill must be defeated.. Why should we be talking about the "NEXT"

bailout!!!????

[chill_wind]

5. And as for bailing out the Bailor-Outer?

FDIC:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4149205&mesg_id=4149205

[endthewar]

6. The dealbreaker to me

was when it was clear that the $700 billion came out of nowhere and was just a large sum of money chosen without much thought.

[WorseBeforeBetter]

2. Transfer of wealth?

Which is actually pretty smart, if you're on the receiving end. Which I ain't.

[billyoc]

3. To run away with the money.

Stupid question.

[chill_wind]

4. Cui bono?

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4153867

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4151446#top

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4153383

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4150978

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4152306

[Demeter]

7. I Have Many Adjectives to Describe Paulson---Smart Isn't One of Them

Greedy, arrogant, rapacious, cynical, in over his head, double-dealing, callous, irresponsible, ignorant, foolish, and due for several big, nasty consequences when Obama takes office and throws his ass into jail.

[dixiegrrrrl]

8. K&R

:kick:

[formercia]

9. Hank was instrumental in promoting the deregulation

that led us all here and he made his fortune as a result of it. If anyone should recuse himself from this mess, it's him.

[Pooka Fey]

10. K&R

[blue97keet]

11. The Fed's little $620 billion experiment fizzled

Fed injects $620 billion into credit markets immediatly after the House voted NO on the bailout, but the banks are still stockpiling reserves. Now the $810 bailout ammended (porked up) by the Senate is supposed to free up credit? I don't think so. Instead "Congressional action is required to provide sufficient capital for financial firms to emerge from the swamp of illiquid mortgage-backed assets."In other words the Paulson plan is a bailout for the financial firms, not the credit market.

====================================================================================
from market update: sept. 30, 2008
Commonwealth financial network

John Blood, CFA, Chief Market Strategist, Commonwealth Financial Network

"In response to the Congressional shocker, the Fed, working in concert with central banks around the world, injected up to $620 billion into short-term credit markets--a massive liquidity injection designed to offset the negative implications of both Congress' decision and deteriorating credit conditions. The move helped to cushion the blow in the short term and to delay, at least for now, an immediate worsening of credit. In the long run, however, Congressional action is required to provide sufficient capital for financial firms to emerge from the swamp of illiquid mortgage-backed assets."

----------------------------------------------------------------------------------------------------------
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080930/REG/809309997/1036
Global banks flush with cash?but short on desire to lend it
Central banks injecting loads of capital into money markets, but financial institutions stockpiling reserves

September 30, 2008 3:31 AM ET

"The Federal Reserve more than doubled reciprocal swap lines with the European Central Bank and eight other central banks on Monday to $620 billion from $290 billion previously.

The actions by the central banks have left banks with more than they need. But many are still clinging to the funds."

[moodforaday]

12. Kick

:kick:

[chill_wind]

13. Hank Won.

The Congressional Bush/Paulson Blow Job Act of 2008-- with Tax Cuts.

For the Upper Middle Class.

Hooray!

[yurbud]

14. because in the shade

it's hard for others to see you steal