The podcast is not yet available for free, but on today's 'This American Life' with Ira Glass, Glass delved into the Credit Default Swap market at great length, explaining how it relates to the financial crisis.
That was interesting.
Here's what's more interesting: There were two plans floated among economists as to how to shore up the balance sheet of insolvent banks.
The first was the the plan we thought we exclusively got, which is pretty bad, and attempts to do the impossible: Establish a price on impossible-to-value-assets and have the Treasury buy them on behalf of taxpayers. Either the banks get hurt further because the price paid is too low, or the taxpayers get hurt because the price paid is too high.
The second plan was killed by the banking lobby (or so they thought). This was essentially a 'stock buy-in' plan, whereby taxpayer dollars would have bought equity, maybe even preferred equity, in those banks needing to raise cash. Via this plan, there wouldn't have to be any mechanism to 'value' any assets, let alone impossible-to-value assets, as each dollar of taxpayer money would have bought a proportionate share of all the assets of the bank, good, bad and ugly.
Here's the fascinating part: According to Glass and the economists, academics and policy wonks that he's been in touch with, and who have reviewed the final draft of the legislation that is now a fait accompli, both aspects have been incorporated into the bailout legislation, so that whoever the Treasury Secretary is at any given time may choose either method to 'help' banks and financial institutions.
This is the very first time I've known of this. Not a single financial or 'mainstream' media source has reported this.
The podcast of the show will be available for free on Monday @ http://www.thislife.org/
That was interesting.
Here's what's more interesting: There were two plans floated among economists as to how to shore up the balance sheet of insolvent banks.
The first was the the plan we thought we exclusively got, which is pretty bad, and attempts to do the impossible: Establish a price on impossible-to-value-assets and have the Treasury buy them on behalf of taxpayers. Either the banks get hurt further because the price paid is too low, or the taxpayers get hurt because the price paid is too high.
The second plan was killed by the banking lobby (or so they thought). This was essentially a 'stock buy-in' plan, whereby taxpayer dollars would have bought equity, maybe even preferred equity, in those banks needing to raise cash. Via this plan, there wouldn't have to be any mechanism to 'value' any assets, let alone impossible-to-value assets, as each dollar of taxpayer money would have bought a proportionate share of all the assets of the bank, good, bad and ugly.
Here's the fascinating part: According to Glass and the economists, academics and policy wonks that he's been in touch with, and who have reviewed the final draft of the legislation that is now a fait accompli, both aspects have been incorporated into the bailout legislation, so that whoever the Treasury Secretary is at any given time may choose either method to 'help' banks and financial institutions.
This is the very first time I've known of this. Not a single financial or 'mainstream' media source has reported this.
The podcast of the show will be available for free on Monday @ http://www.thislife.org/