Rushed legislation

Greetings, loyal minions. Your Maximum Leader, as you all surely know, is not a fan of legislation that is rushed through the Congress and signed quickly by the President. It almost always is rife with problems and unintended consequences.

To wit: the big “bailout/rescue” package just passed by Congress and signed by President Bush. According to the Washington Post in their piece entitled “Treasury’s Rescue Plan Hits Technical Snag”:

Banking regulators are working today to resolve accounting roadblocks that would hold up the government’s plan to revive financial markets by investing $250 billion in the nation’s banks.

The problem is this: Under existing rules, banks cannot count the Treasury Department’s investment as part of their core capital, the foundation of money that supports a bank’s operations. The very goal of the plan was to buttress those foundations, which have been eroded by recent losses, undermining the stability of the banks.

The Treasury’s initial investment in nine of the largest banks cannot go forward until the accounting issues are resolved, people familiar with the matter said. Regulators are now working to figure out how to change existing rules to accommodate the program, the latest in a string of ad hoc measures to address the financial crisis.

Yesterday, the Federal Reserve issued a rule, effective today, that suspends its long-standing objections to counting such an investment toward core capital. But other regulators have yet to act.

Beautiful. Just friggin beautiful. You’d think that someone might have thought of this while they were actually debating the law.

Friggin beautiful…

Carry on.

1 Comment »
Huck Foley said:

“Under existing rules, banks cannot count the Treasury Department’s investment as part of their core capital, the foundation of money that supports a bank’s operations.”

My daddy once gave a sermon with a story in it and I forget where he lifted the story from but here’s the gist of it. Dante, or somebody just like him, was on a guided tour of Hell, and one stop was at the banquet hall, where a lavish feast was laid out, and jillions of sinners sat at the table, but couldn’t eat any of it, because their arms were stretched out and tied to long poles laid across their shoulders, keeping them from getting anything to their mouths.
“But wait!” says Dante, or whoever, “Couldn’t they just feed each other?”
“Ah, alas,” says Virgil, or whoever, “If they were capable of thinking of that, they wouldn’ be here.”

The point of the M.O.A.B. (*) originally was for the gummint to be buying those toxic assets inna first place, right, but instead they’re buying equity shares of the banks, right? While they wait around to figure out HOW to buy the toxic assets, right?
Well, assuming that’s mostly right, here’s my question:
Even though the banks can’t count the Treasury injections (from at-gunpoint stock purchases) as their OWN core capital, don’t they, like, own the proceeds from those stock sales? So
couldn’t they, like, use THOSE funds to buy up each other’s toxic assets?
Or are there rules against THAT too?

(* Mother Of All Bailouts, of course)



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