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“This administration is moving swiftly and aggressively to restore confidence, and re-start lending.
“We will do so in several ways. First, we are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running." (President Obama)
The PPIF (Public-Private Investment Fund) is a way of showering speculators with subsidies to purchase non-performing loans at bargain-basement prices. The Fed is using a similar strategy with the TALF (Term Asset-Backed Securities Loan Facility) which, according to the New York Times, could easily generate "annual returns of 20 percent or more" for those who borrow from the facility.“We will do so in several ways. First, we are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running." (President Obama)
From the New York Times:
"Under the program, the Fed will lend to investors who acquire new securities backed by auto loans, credit card balances, student loans and small-business loans at rates ranging from roughly 1.5 percent to 3 percent.
“Depending on the type of security they are borrowing against, investors will be able to borrow 84 percent to 95 percent of the face value of the bonds. Investors would not be liable for any losses beyond the 5 percent to 16 percent equity that they retain in the investment.
“In the initial phase, the Treasury will provide $20 billion and the Fed will provide $180 billion. Treasury Secretary Timothy Geithner said last week that the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion."
This is a ripoff, which is why the plan is being concealed behind abstruse acronyms and complex explanations of how the transactions actually work. The only way investors can lose money is if they hold on to the securities after they fall below 16 percent of their original value which, of course, is unlikely, since the buyers can bail out at any time leaving the taxpayer holding the bag. Call it the "Geithner Put", another gift from Uncle Sugar to Wall Street land-sharks.“Depending on the type of security they are borrowing against, investors will be able to borrow 84 percent to 95 percent of the face value of the bonds. Investors would not be liable for any losses beyond the 5 percent to 16 percent equity that they retain in the investment.
“In the initial phase, the Treasury will provide $20 billion and the Fed will provide $180 billion. Treasury Secretary Timothy Geithner said last week that the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion."
http://www.counterpunch.org/whitney02262009.html