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.
Such a deal. How is this anything other than the newest remix from Geithner's broken record? It's essentially asking Americans to buy back their foreclosed homes based on a pricing structure everyone agrees to be largely mythical under the guise of some form of future potential profit. It would be ironic if it weren't so insulting.
This is not "having a seat at the table." It's just another misguided swing at getting the American taxpayer to pick up the check.
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