Those of you outside Minnesota probably remember Norm Coleman as the guy who won his senate seat when Paul Wellstone died in a plane crash. He hasn’t done much since. But still, Norm’s a political powerhouse in Minnesota, even if he’s taken a weird, meandering course in his career. And he’s leading challenger Al Franken (about whom I could write volumees, and someday will) by a narrow margin.
Still, Norm occasionally says some radically stupid things. For instance, he has an…er…novel take on the trillion dollar giveaway. It’s like the lottery — we could win big, America!
Yeah, it seems insane, but in a town hall meeting in North Mankato, Minnesota, Coleman said that the U.S. government could make up to $14 trillion on the deal.
“The government could make 10 or 20 times what it pays on this, possibly,” said Coleman, according to the Mankato Free Press.
Of course, he did admit that he does “worry a little bit” about giving a trillion dollars away. And I suppose it is worth worrying about a bit, but we’ve got bigger things to worry about, like the fact that Al Franken’s angry, so it doesn’t matter, right?
Seriously, it’s hard to overstate how out to lunch this valuation of possible return on investment is. I mean, first off, if there was $14 trillion in profits outstanding, the foreign banks that still have money would be lining up to throw money into the market — we wouldn’t need taxpayer rescue. But of course, $14 trillion isn’t going to be made; $14 trillion is more than the entire U.S. gross domestic product. It’s not just ludicrous to suggest that the U.S. could earn a whole year’s GDP back on this horrible, horrible bet — it’s completely disconnected from reality. It’s not only not in the ballpark, it’s not only not in the universe, it’s not in the multiverse of possible outcomes from this debacle.
Of course, Norm, like most Republicans, has been a big fan of deregulating everything that moves over the years, and an even bigger record of throwing taxpayer money at corporations (for instance, he still touts his role in bringing hockey back to Minnesota when he was mayor of St. Paul. And how did he bring hockey back? That’s right, he built an arena with taxpayer funding). So basically, if he’s going to run on his record, he’s screwed. So instead, he’ll pretend that putting all our money on double-zero could turn up big, big winnings for America. Oh, and Al Franken’s angry. Victory!
Of course, Norm, like most Republicans, has been a big fan of deregulating everything that moves over the years
One of those exceptions being Sen. McCain. Back in 2005 McCain co-sponsored a bill to increase oversight and regulation of Fannie Mae because of a report that the company had overstated its financials in order to ensure bonuses for it’s executives. The Democrats, led by Rep. Barney Frank (D-Mass), the very guy who’s been all over the TV these days about the financial crisis, shot it down on the basis that tightening up the rules would limit poor people’s access to housing loans. Of course, poor people have even LESS access to housing loans now.
Here’s what I’m trying to figure out. Technically, we are not GIVING this money to these corporations; we are buying assets from them. What I don’t know is what terms we are buying them on. Are we buying them at the value that those corporations carry them on their books, or are we buying them at some discount?
Me, I somehow doubt like Hell that we are going to be able to sell these assets for as much money as we are paying them for them. I would consider any loss we take as a grant to the companies we bought them from. I’m curious as to what planet the Senator lives on that he thinks we’re going to make money on this deal – unless we are getting them at a huge discount.
65 cents on the dollar, allegedly.
I heard 65cents on the dollar from bill gross of pimco. I think its likely we’ll make a profit on this when housing prices recover.
Previous bailouts, chrysler and LTCM, ended up as huge gains for the buyer, even though the assets were worth close to zero by the market, because of lack of liquidity and short-term irrationality as well as market uncertainty, at the time of the purchase…which was done at a much higher price.
I understand one problem is the mark to market accounting structure, which forces the bank to value these securities at close to zero, thus rocking their debt to tangible assets ratio which destroyed their credit rating thus drying up their ability to borrow., reuslting in them selling themselves or going bankrupt.
the blackstone group has been going around saying this for a while, quietly stocking up on these assets at a bargain. but only the US govt has the money to take the entire portfolio.