Saturday, February 07, 2009

Of Course They Did

A TARP watch-dog is shocked that Hank Paulson's Treasury overpaid for assets it acquired.
Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the bailout funds, told the Senate Banking Committee on Thursday that Treasury in 2008 paid $254 billion and received assets worth about $176 billion.

The figures were reached by extrapolating the results of a study of 10 government transactions, comparing the price paid by Treasury and the value of the asset at the time of purchase. Warren did not present details of the transactions the panel analyzed. A full report will be released Friday.

If the TARP was supposed to buy assets at their market value, what was the all-pressing need for a TARP?

Again, overnight lending had not "frozen up" it was just more expensive than banks would like (anyone who purchased gasoline in Sep 08 knows the feeling). There were plenty of buyers for so-called "toxic assets", just not at bids the banks liked (anyone who has tried to sell a home since Sep 08 knows the feeling).

The entire point of the TARP was to overpay for assets. When you give a $350,000,000,000 blank check to somebody, with a mandate to "spend, spend, spend" you aren't encouraging thrift.

I would never defend Paulson and Kashkari but, Senator Dodd, what did you expect them to do with the money? Barney Frank, did you expect the former heads of Goldman Sachs to survey money managers they don't like as to
what to buy and how much to pay for it?

Is it really so surprising that the assets purchased were those of friends at inflated values?

Chris Dodd must also sit at green lights wondering where everybody went.

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