Wednesday, November 12, 2008

Malodorous FRP to Spread Beyond Banks?

Treasury Chief Hank Paulson asked America to pull his finger, when he announced major proposed changes to the financial rescue program (FRP). Two months ago, Hank sounded the alarm on a credit crisis and Congress acted, passing a $700 billion toxic asset relief program (TARP).

Since then, Treasury freewheeled. Rather than buy junk assets, Uncle Sam is recapitalizing financial firms. In some cases, shareholders have been wiped out; not so with others.

Paulson proposed going beyond banks, to issuers of other securitized credit (car loans, student loans and credit card debt), insurance companies, unregulated financial firms (like hedge funds), and the auto industry. He also wants to pave the way for private investment, from firms like The Carlyle Group. William Conway likes an unlevel playing field, one titled towards his private equity underwriter (PEU). How might Uncle Sam and PEU's team up under Hank's proposal? That remains to be seen.

The aim of the FRP was getting credit and lending flowing again. That hasn't happened in any substantive way. It's hard to see anything other than a Three Stooge like home remodeling job. Tell me when the big money boys are done with their Corporafornication of the American taxpayer.