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Five Things: Rampant Ponzi-monium


Geithner unveils plan that does little more than institutionalize hope.

1. Geithner Institutionalizes Hope

Today we finally got the full details of Treasury Secretary Tim Geithner's plan to rescue failing banks. The Public-Private Investment Program, or PPIP, will provide $500 billion in "purchasing power" to facilitate the purchase of distressed assets.

What does this mean? It's very simple. The term "distressed assets" is what people on Wall Street call things you and I would refer to as "crap nobody wants."

Think of it this way; if you own a warehouse full of these,

then you have what someone at an investment bank on Wall Street would refer to as "an undervalued asset."

However, if you have a warehouse full of these,

then you have what Wall Street people call a "distressed asset."

Following the Wall Street business model, eventually this...

...will become a "distressed asset," too, because you're 35-1 leveraged in it.

2. "Ponzimonium" is Rampant... Indeed

Wasn't it only a few days ago U.S. federal regulators were warning of "Rampant Ponzimonium"? Yes, yes it was. And so how did we ever get to the point where the U.S. Treasury Secretary could unveil a plan that does little more than institutionalize hope, (by which I mean "Rampant Ponzimonium"), and collectively we would barely even bat an eye?

O Lord, where will it end?

But never mind all that now. Let's get back to the shutter shades and how the Public-Private Investment Plan will help you out of your deep "distressed asset" hole.

The name itself, "Public-Private Investment Plan," sounds suspiciously like the kind of hair-brained scheme a wall-eyed traveling vacuum cleaner salesman might conjure up. Which it is. And so the main problem with the plan is it does little more than institutionalize hope; hope that the economy will somehow make bad assets good.

There's always hope. After all, it only took 25 years for shutter shades to rebound from "distressed asset" to AAA-rated sunglasses. Of course, the downside is it's taken barely 2 years for them to return to "distressed asset" again.
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