Inspector General warns Geithner plan gives banks blank check from taxpayers' checkbook
I’m relieved that The Office of the Special Inspector General for the Troubled Asset Relief Program (TARP) is now warning about the threat of collusive massive overpayment for toxic assets that I warned about on March 21, one month ago:
The significant Government-financed leverage presents a great incentive for collusion between the buyer and seller of the asset, or the buyer and other buyers, whereby, once again, the taxpayer takes a significant loss while others profit.
An inspector general warning is hardly a guarantee the government will prevent banks from grabbing all the free taxpayer money they want using the insane government subsidies (non-recourse loans up to 97% of the value of assets “purchased” by private parties). But at least the concern is in the public record. Geithner can’t later claim, “I never imagined my scheme would let banks rip off taxpayers so badly.” And, hopefully, Congress or the Treasury will change the scheme to not give banks blank checks from the taxpayers' checkbook.
Posted by James on Tuesday, April 21, 2009