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April 9, 2009
U.S. May Enlist Small Investors in Bank Bailout
By GRAHAM BOWLEY and MICHAEL J. de la MERCED
During World War I, Americans were exhorted to buy Liberty Bonds to help their soldiers on the front.
Now, it seems, they will be asked to come to the aid of their banks — with the added inducement of possibly making some money for themselves.
As part of its sweeping plan to purge banks of troublesome assets, the Obama administration is encouraging several large investment companies to create the financial-crisis equivalent of war bonds: bailout funds.
The idea is that these investments, akin to mutual funds that buy stocks and bonds, would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. But there is another, deeply political motivation as well: to quiet accusations that all of these giant bailouts will benefit only Wall Street plutocrats.
The potential risks — politically for the administration, and financially for would-be investors — are considerable.
The funds, the thinking goes, would buy troubled mortgage securities from banks, enabling the lenders to make the loans that are needed to rekindle the economy. Many of the loans that back these securities were made during the subprime era. If all goes well, the funds will eventually sell the investments at a profit.
But, as with any investment, there are risks. If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses.
http://www.nytimes.com/2009/04/09/bu...Mb2gajlONaA2lw
What's next? To quell their hyperinflation, Weimar Germany issued new Marks, backed in part with state-owned land. Maybe that's next. I'm thinking Yosemite on the $100, the Grand Canyon on the $50, the entire city of Washington on the buck.
Now, it seems, they will be asked to come to the aid of their banks — with the added inducement of possibly making some money for themselves.
As part of its sweeping plan to purge banks of troublesome assets, the Obama administration is encouraging several large investment companies to create the financial-crisis equivalent of war bonds: bailout funds.
The idea is that these investments, akin to mutual funds that buy stocks and bonds, would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. But there is another, deeply political motivation as well: to quiet accusations that all of these giant bailouts will benefit only Wall Street plutocrats.
The potential risks — politically for the administration, and financially for would-be investors — are considerable.
The funds, the thinking goes, would buy troubled mortgage securities from banks, enabling the lenders to make the loans that are needed to rekindle the economy. Many of the loans that back these securities were made during the subprime era. If all goes well, the funds will eventually sell the investments at a profit.
But, as with any investment, there are risks. If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses.
http://www.nytimes.com/2009/04/09/bu...Mb2gajlONaA2lw
What's next? To quell their hyperinflation, Weimar Germany issued new Marks, backed in part with state-owned land. Maybe that's next. I'm thinking Yosemite on the $100, the Grand Canyon on the $50, the entire city of Washington on the buck.
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