Fiscally nuts. Socially insane.

Wednesday, September 24, 2008

I'm Doubting This Logic

I'm reading Ace of Spades, and I'm getting quite confused...

"Clarification on Bailout: It Won't Cost 700 Billion, Ultimately... In all likelihood, it will cost far less. It's possible (not even unlikely) that the government will actually make money on the deal... ...Currently these assets are temporarily worthless as no one will buy them. But as soon as a functioning market returns, they'll be worth something.

How much? Who knows. That's part of the problem; no one can currently say what they're worth. But once a normal market returns, they'll be worth something -- a solid fraction of their prior value. Maybe 3/5ths, maybe 3/4ths.

The government's play, as I understand it, is to begin buying these assets at deeply discounted prices, due this being a distressed sale and all. Doing so will cause Wall Street and others to lose money and take big losses, but not so much as to knock most of them into bankruptcy."


The thing is, though, these are, by default (irony on the word - haha? ok, no) the least attractive assets available. After the market returns, I suspect a much purer system; brokers will think twice about buying a shitty asset, and these won't sell... ever.

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