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K Marx The Spot

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02 April 2008

I Have Heard this Story Before

I think that I know the ending of this one. Financial institutions tell everyone that they really, really know what they are doing. Then they foul up, egregiously. And taxpayers wind up bailing them out.

Just some more detail from the WSJ: Mortgage Securities Back Fed Loan to Bear Stearns.

The securities backing a $29 billion Federal Reserve loan to Bear Stearns Cos. consist primarily of "mortgage-backed securities and related hedge investments," the Treasury Department said.

...

The Fed has declined to provide any underlying detail so far.

JPMorgan will take the first $1 billion in losses on the $30 billion portfolio, and the U.S. taxpayers will pay for the remaining losses (if any).

Yes, it is a good thing that the soi-disant grown-ups are fouling up the government again. Of course, they are the same people who do not believe in government, so there is no reason to think that they have any incentive to show that the government can do things right.

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Posted by Tim W at 4/02/2008 09:36:00 AM

11 August 2007

Your Ownership Society at Work

Remember all the talk about how privatizing Social Security was a real smart thing to do? And the talk about investing in the stock market was a great and noble thing?

The Bush administration is scared enough about the actually existing stock market that the Federal Reserve has bought $19 billion in mortgage-backed securities. As Brad DeLong succinctly notes, this is extraordinary. And it should put paid to the notion that the markets are panaceas. But should is a normative word. Those who hate the idea that Social Security helps the poor at the (slight) expense of the rich will still bring it up—just not this week.

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Posted by Tim W at 8/11/2007 05:50:00 PM

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