So the Financial Times reports that:
US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.
Which means that, (as Joe Wiesenthal at Clusterstock points out):
Banks buying assets from each other to inflate their books has nothing to do with “price discovery” or any such nonsense. It’s all about using taxpayer money to create bids that are higher than what the market currently prices those assets at. And if it turns out those bids were too high and the cash flows never materialize then, oh well, it’s the taxpayer left holding the bag.
Which prompted this from Rep. Spencer Bachus:
Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”.
Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.”
You will never stop Wall Street greed and gall unless you legislate it (and even then…). People keep saying that it is the end of an era on Wall Street. My feeling is that it might be, but the end will only be temporary, of course. After all, they repealed Glass-Steagall, and that, in part, led to where we are today. But, if, for some reason, Congress and the international community doesn’t act to firmly regulate the financial industry, we are doomed.