Monday, September 29, 2008


" (c) DIRECT PURCHASES.—If the Secretary deter
mines that use of a market mechanism under subsection
(b) is not feasible or appropriate, and the purposes of the
Act are best met through direct purchases from an individual
financial institution, the Secretary shall pursue additional
measures to ensure that prices paid for assets are
reasonable and reflect the underlying value of the asset. "

Isn't the use of these extreme measures indicative of the fact that the very opposite is the case! That by acting as the purchaser-of-crap-of-the-last-resort it is guaranteed that prices being paid for these assets are not reasonable and can't possibly reflect the intrinsic value of the assets (because if they did reflect the underlying value wouldn't someone else be interested in buying them too?) Or more importantly shouldn't it be determined that they are being purchased at a discount!

1 comment:

  1. According to Naked Capitalism via Clusterstock, this provision simply means Paulson can't pay more than the original 'value' of these stinkers. We should all certainly hope not. Bill Gross and Omaha's Oracle both opposed this absurd notion that paying far over market price leads to price discovery. I don't know how anyone could possibly with such an asinine concept as making artificially inflated bids into an illiquid market leads to price discover, but that appears to be the logic here: Pay more than the market is willing to but less than the price at origination. Oh, and by the way, as per Pelosi, this is not a bailout, it's a buy in. Yay?


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