Thread: Where Are The Damn Handcuffs? Let me 'splain it in English

Tuesday, January 5. 2010
Posted by Karl Denninger in Banking System at 08:18

Where Are The Damn Handcuffs?

If you're not mad enough to contemplate the use of your pitchfork and torch after reading this, you are unfit to be an American and should immediately book yourself on a one-way flight - to Yemen.

This is about PPIP - and a game I predicted would be played in March of last year. Specifically: http://www.bloomberg.com/apps/news?pid= ... lHXI&pos=3

Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.

You got that?

Let me 'splain it in English.

The banks bought bonds that were worthless in the open market, because The Government intended to intentionally overpay for these bonds.

This is exactly what I said would happen in March of 2009: http://market-ticker.org/archives/901-T ... -PPIP.html

There's nothing complicated about this at all.

Buy for 30 cents, sell to the PPIP for 50 cents, pocket a quick (and huge) profit immediately and nobody's the wiser.

Now here's the problem.

We were later told that the FDIC would not allow the banks to game the system like this.

That was a lie too.

It’s “absolutely ridiculousâ€

Pitchfork, torch, and the tar and feathers should be flyin'! I'll keep it at that, as I don't want to cause alarm with what I really think.