Friday, September 26, 2008
Assets and the Government Bailout
Here's what I don't get: why does the government have to buy the mortgages? All the companies the government is looking to bail out have assets. If the boards and CEOs running the companies want to stay afloat at all, couldn't they just sell off their assets? I would guess that a lot of small- and medium-sized mortgage companies would be willing to buy them. A few people might even be willing to start up a mortgage company to buy up what would undoubtedly be some great deals. Instead, the government is buying the assets at a much higher price than they would be worth in the market. Which seems odd, except that the government is also picking and choosing who they are bailing out, and those they are bailing out all have very strong, very deep connections to certain politicians. Sounds like it's payback time for various forms of donations to certain politicians to me. I'm guessing there is a huge scandal here the media is going out of its way to ignore. And this seems to be a scandal that laziness cannot excuse, as it seems that it's taking them more effort to ignore it than to see the scandal sitting right there in front of them. So why are they ignoring it?
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2 comments:
What is to stop companies that have not been affected by the financial crisis from buying CDO's?
That is a good question. Uncertainty cannot be the answer. After all, people invest in companies that undertake mineral exploration and scientific research.
I think the answer might be that anyone thinking of setting up in that business would fear competition with a government agency backed by a huge amount of taxpayer's dollars. That is the point you are making when you suggest that the government will pay more than the assets are worth on the market.
Exactly. Who has a chance in competing with a government that can get all the money it wants through 1) taxation, 2) borrowing, or 3) just plain printing the money it wants to buy things?
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