> But an article on the front page of Wednesday's FT gives an almost
> diametrically opposite plan. After saying that "Senior Wall Street
> executives said yesterday that they ahd been sounded out on plans for
> an 'aggregator bank' that would purchase toic assets from banks," the
> article goes on to say:
>
> <quote>
>
> Under one of the plans discussed, toxic assets would be valued by an
> independent party. Where assets are purchased at prices below their
> book values, the government might then inject common equity into the
> banks to make up for capital wiped out by the sales.
>
> <unquote>
>
> It's only a sketch, but like I said, it represents a completely
> different take than the Paulsen plan. There's no paying above market
> value and there are equity stakes, perhaps substantial ones.
>
> The devil's in the details, but at first sight, as a floorplan, this
> doesn't sound stupid, either economically or politically.
>
> So maybe the "aggregator bank" idea shouldn't be trashed sight unseen.
My understanding is that for many or most big banks, the govt already owns so much equity that any additional equity stake would result in nationalization, which the O-team opposes. It's pretty much an iron trilemma: (1) getting toxic assets off the balance sheet; (2) leaving banks in private hands; (3) not giving away free money to bank shareholders and creditors. You can do any two of these but not all three. That's the whole reason people were calling for nationalization.
The game was over when the Obamites made it clear they wouldn't nationalize - and couldn't even come up with a fig-leaf rationale for why not. In fact, probably Obama's finger-wagging about Wall Street bonuses was a way to shield himself from the inevitable criticism from the left that will come when he unveils the plan next week.
SA