Did you hear today's TAL?

I wasn't sure I was hearing right at the end... or following the meaning of this buried paragraph in the "bailout" bill... unfortunately the podcasts aren't available until the Monday following the broadcast... not having been able to review it, I may be mistaken, but this was my impression.

Apparently this bill has another face, that it can be read in reverse.

There's a paragraph, subtly written, that slipped by virtually unnoticed in the hundreds of pages added by the Senate. The Democratic Party leadership had to have been aware of it--which means Obama was aware of it and likely represents what will happen to this bill with him in the White House.

Drawing attention to it would have doomed it.

What Paulson asked for and the banks lobbies for, a proposal starkly simple--such that it's points were covered in three pages in the original--was to pay off banks for their losses on bad loans--with no return of value.

This paragraph gives the Treasury Secretary power to execute a completely different plan--namely, in paying off the bad debt, to buy ownership in those properties--something called a "stock option," the form most economists had wanted but thought there was hope of getting. So instead of simply giving the money to holders of those mortgages while they kept ownership of the properties, the government in effect, owns the value of the properties, not the holders of the mortgages. The bailout money, instead of purchasing bad debt and leaving the actual properties in the hands of the banks, purchases the value or future value of the properties--so the banks get money to remain solvent and credit remains available, but they lose their claim to profit later on property foreclosures.

Unless my understanding is way off, this throws a very different light of the political maneuvering behind the Senate's revision of this bill.
Jacob Russell | Homepage | 10.05.08 - 8:03 pm | #