Government Better Hope Public Private Investment Program Works
The market rallies 500 points today. Why? Partly because Tim Geithner’s plan does not wholly suck. The market sort of breathed a sigh of relief that the plan was deployed and it was exactly what the market expected. Kind of interesting that the market couldn’t anticipate that Obama and the boys would do the right thing. The market had to wait until it was actually released. Seems the government has been perceived as untrustworthy as far as wealth creation is concerned.
Jim Cramer on Mad Money is behind Geithner’s plan. He gave an outline tonight that indicated that the Administration has flopped from not caring about the market to understanding that it actually matters to every American and not just Wall Street.
That said, Americans you are getting screwed, yet again. This $1 trillion public/private partnership gives taxpayers ALL the risk and about half the reward. We put in 80% and get 50% potential profit. Hedge funds and other private entities put in 20% and get half the upside. No wonder the market rallied hard. Wall Street loves low risk, high reward. As taxpayers, you better hope this shit works.
What’s the upside for taxpayers? I’m not certain. As someone who trades the market I’m certainly happy when the market goes up (Though ultra short ETFs can make the ride around the bowl a little more tolerable) and will not be fighting this massive influx of cash. I guess if you have lost 70% of your 401(k) you can be happy that you might see some upside short term. Though I would imagine that for all the deficit increases Team Obama is cramming down our throats it will be short-lived as taxes will have to be raised for everybody at some point to pay for all of it, not to mention the potential for incredibly scary inflation.
I’m just a simple guy. If the toxic stuff was worth anything why would the banks want/need to get rid of it? The only way they can get rid of it is if the taxpayers back the risk. Why would we want to do that? I realize that I am making a complicated matter very simple, but any way you look at this plan, the taxpayer is on the hook for all the risk and very little of the reward. Politicians win if it works. Banks win if it works. Investors win if it works. But the taxpayer only breathes a sigh of relief that it didn’t fail. At least that is how it seems to me.
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