Bailout actually for benefit of foreign investors?

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ike's picture
ike
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Joined: Sep 17 2008
Posts: 19
Bailout actually for benefit of foreign investors?

Anybody see this post on Denninger's site?

An excerpt:

""Hundreds of billions of dollars are going to bail out FOREIGN INVESTORS. They know it, they demanded it, and the bill has been carefully written to make sure that can happen." - Brad Sherman , D-California"

That's right folks. You are going to have $700 billion - about 25% of the total federal budget - put on your personal credit card (via taxes forever) in order to bail out foreign investors.

Oh, and the best part of it is that the underlying assets involved do not even have to be in the United States!

....

That is, it is perfectly legitimate under the bill for a foreign bank to sell or swap any "crap sandwich" it may hold (irrespective of how or where it originated, so long as a mortgage is the basis for it somewhere) with a bank domiciled in the United States, and said bank may then "PUT" it into the TARP.

Note also that Representative Sherman said on Kudlow last night that when this was raised with Secretary Paulson he was told that if Congress tried to restrict the ability of the Secretary to purchase assets "laundered" in this fashion from foreigners, that the bill would be vetoed.

I'm not sure what to make of it, myself...Undecided Is this obvious to everyone here and I missed it or is this a fringe interpretation of what's happening? I understood bailing F&F as bailing all the foreign investors holding their paper, but this would seem a whole other ballgame... one I can barely turn over in my brain...

vegas316's picture
vegas316
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Posts: 15
Medieval physiology
This seems reminiscent of medieval physiology. They have now brought in the leeches to drain the blood from our economy. The humor ironically, is that this, like then, is probably just gonna just kill us instead. (pun intended)
Caasi's picture
Caasi
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Posts: 23
Bailout the world

I believe you are exactly right. The primary reason for the bailout in its present form is to help the European financial system. Daniel Gross of the Centre for European Policy Studies spells out their problem in an article in the Financial Times Sept 23.

http://www.ft.com/cms/s/0/41960e1c-8972-11dd-8371-0000779fd18c.html

In an article today Mike Shedlock "Mish" mentioned a Bloomberg report which had Brown and Trichet pushing for a bailout to help the "global financial system" as a US responsibility to the world.

http://globaleconomicanalysis.blogspot.com/2008/10/trichet-brown-pressure-bush-to-pass.html

He also has an entry for Sherman and his statement on this, with links.

gsti's picture
gsti
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Joined: Jul 21 2008
Posts: 60
Thats a big jump

Guys, I think you are going from:

Europe cannot afford for America to collapse >>  America is stopping Europe from collapsing.  It's a subtle difference.

If AIG only has 300 bill of insurance exposure to European banks, then thats absolutely nothing.  They will fix that with a couple of keystrokes. 

What would be far more likely is that European nations would change capital reserve requirements completely, ECB borrowing requirements would be dropped and where required alternative insurance would be purchased. 

However a collapse of the American financial system, would inevitably do the same to Europe, with euro held US assets being marked down to 0 or close and very low dollar values, the euro banking system would be in big big trouble. 

As Chris has pointed out before, if someone drops their dollar holdings (it won't be the europeans) then the party is over for US and Europe financial systems. 

Europe cannot afford for the US to collapse, there is a world of difference between that and bailing them out. 

 

krogoth's picture
krogoth
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Joined: Aug 18 2008
Posts: 576
I heard about this
I thought it was to prop up not only bad debt to foreign countries, but to keep the American dollar up on the other debt we owe them. It's all BS anyway. Just read the stuff Paulson put in to protect his butt from litigation or prosecution. If it is so good to do this bailout, why all the legal protection needed? We are once again getting railroaded big time by these crooks. History repeats itself over and over by big banking.
Caasi's picture
Caasi
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Posts: 23
Sherman's statement covers that

I'm not sure what the Senate's 400 pages provides in the matter of foreign bank subsidiaries, but Rep Sherman says a provision he offered to exclude foreign owned subsidiaries was rejected. He said, "The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday." 

And in another place, " The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury."

The specific link
http://globaleconomicanalysis.blogspot.com/2008/10/rep-brad-sherman-on-bailing-out-foreign.html

The FT article cited explores the extent of the European problem. As for changing their capital reserve requirements, they are moving to tighten, probably the last thing they should do. Bloomberg covers this:

http://www.bloomberg.com/apps/news?pid=20601085&sid=aWyhaSiNJYHM&refer=europe

A quote from the article,

 "The European Banking Federation said the proposal contains provisions that may restrict banks' ability to lend money to each other. "

 

Tesseractal's picture
Tesseractal
Status: Bronze Member (Offline)
Joined: Apr 18 2008
Posts: 25
Bailout the world

 

The suggestion that America would put together a $700b bailout and send itself down the garbage shute out of some desire to help the European Financial System makes me wonder if people aren't trying to find a scape goat to blame.

As pointed out in the Crash Course this is a problem of the US's own making due to a range of reasons - sadly it is not on its own and some other countries have taken similar actions - they will also pay dearly.

Yes undoubtedly a small proportion of the benefits of of the bailout will flow offshore - and I suggest that is probably more appropriate than the bailout itself - but trying to pass the buck of responsibility, and ultimately accountability, may make someone feel good - fleetingly - but is a detraction and distraction from the issue at hand.  Don't be fooled.

gsti's picture
gsti
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Joined: Jul 21 2008
Posts: 60
RE: I heard about this

You are so right Krogoth.

The words, River, Sold and down are springing to my mind. 

rlee's picture
rlee
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Joined: Sep 18 2008
Posts: 148
A good graph of bailout bill expenditures

Here's a good representation of how your money is being spent, and how much of it is going towards a long-term solution:

Bob   

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