Sunday, March 29, 2009

PPP's 32 to 1 Public Leverage

Wall Street greed and leverage imploded the world financial system. Yet, Treasury Chief Tim Geithner uses hair of the dog medicine to entice America's shadow banking system in participating in public-private partnerships (PPP's). Private investors have to pony up very little equity to play in PPP land.

85% debt
15% equity-Uncle Sam will provide up to 80% of equity capital, Private investors 20%

One fifth of 15% is 3%. That's 33 to 1 public money to private funds. Yes, there's a difference between debt and equity, but taxpayers will provide up to 97% of the funding for PPP's. Greed? Investors expect double digit, even a 25% rate of return.

Greed and leverage are back...