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Update: Bailout=A Sort of Universal Hedge Fund?

by Karen Hatter | October 2, 2008 at 08:53 am

214 views | 13 Recommendations | 12 comments

Daniel Gross, contributing to Slate.com, writes ".... It's massively leveraged. It's buying distressed assets. It's taking equity stakes ....", like a hedge fund, his assertion in the article, How the Bailout is Like a Hedge Fund.

From Slate.com:

The fund's bylaws give the manager (the treasury secretary) significant discretion. He can buy troubled mortgage-related instruments from finance companies (Section 3[9][a], Page 5). But he can also invest in "any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability" (Section 3[9]B, Page 6). The manager then has the authority to manage the assets as he sees fit (Section 106[B], Page 22), collecting revenue streams, holding bonds to maturity, or flipping them for a quick profit (Section 106[c], Page 22). Like many of today's sharpest hedge funds, the Universal Fund will also have the ability to drive a harder bargain by demanding equity stakes, or new debt securities, from the institutions it is helping (Section 113[d], Page 35). It can also do what many of the big hedge funds, and so-called "funds of funds," do: bring in outside managers to run the investment (101[C][3], Page 8).

Of course, adopting the premise of this piece, the most significant difference to note regarding the alleged involvement of investors (taxpayers) in this alleged hedge fund (bailout/rescue package), the choice to invest was not voluntary.

Click here for the original article.

UPDATE:

A link to the Emergency Economic Stabilization Act of 2008, passed in the Senate on October 1, 2008, passing in the House of Representatives on October 3, 2008.

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Heritage

flagged this story as Good Stuff

at 09:06 on October 2nd, 2008

Karen Hatter, I like this story. It's good stuff.

henry birkenbine

at 09:59 on October 2nd, 2008

at least ACORN does not get the 20% profits from it anymore.

René

flagged this story as Good Stuff

at 09:22 on October 3rd, 2008

It's much worse. They are asking Congress to approve buying fake assets that don't exist. Where is the equity in that? It's like the 'naked short sells'.

bill hicks

at 11:51 on October 3rd, 2008

But we would have had to give the people who caused the problem at least 20% of all profits. If 99 assets lost a billion each and one made 100 billion, ACORN would have gotten at least 20 billion. ACORN is a total liberal democratic party organized crime unit. Obama trained the leadership in Chicago. That was his community service.

djangofan

at 14:28 on October 3rd, 2008

exactly. in this bill the government is buying US Treasuries from ITSELF using money that was created via the sale of US Treasuries in the first place. I call this recursive financing. our country is about to melt down.

Karen Hatter

at 18:49 on October 3rd, 2008

Adapted from the FightTheSmears site:

Barack Obama was never an ACORN community organizer.

Barack Obama was never an ACORN trainer and never worked for ACORN in any other capacity.

ACORN was not part of Project Vote, the successful voter registration drive Barack ran in 1992.

In his capacity as an attorney, Barack Obama represented ACORN in a successful lawsuit alongside the U.S. Department of Justice against the state of Illinois to force state compliance with a federal voting access law. For his work helping enforce the law, called “Motor Voter,” Barack received the IVI-IPO Legal Eagle Award in 1995.

Ken Blackwell is best known today for disenfranchising Democratic voters in his dual role as Ohio Secretary of State and chair of George Bush’s Ohio campaign in 2004.

Many assertions levied by conservatives regarding the organization are refuted here.

Rhonda J Mangus

flagged this story as Good Stuff

at 14:15 on October 3rd, 2008

Karen Hatter, I like this story. It's good stuff.

djangofan

at 14:24 on October 3rd, 2008

One thing is for sure. The government was just given the power to buy more US Treasury bonds FROM ITSELF, thereby creating 700 billion of new bank deposits in our economy. Once the Federal Reserve has the new deposits on account then it is allowed to loan out 9x that value to anyone who wants loans due to the 10% reserve requirement. This creates 7 trillion new dollars in our economy directly from simply buying bonds from ourself. The money is created out of thin air. The government just printed 7 trillion new dollars and inflated our aggregate money supply by approximately 51 trillion/7 trillion, or 13.7% . The government basically taxed EVERY American by 13.7% in one single day. Isn't anyone going to stop them from this theft??

djangofan

at 14:26 on October 3rd, 2008

By the way, im not so sure you provided the correct link to the bill. I think you provided a link to the October 1st version rather than the October 3rd version.