On Thu, Jan 22, 2009 at 4:39 AM, Julio Huato <[email protected]> wrote: > raghu, > > Yes, the bankers are the common equity holders. I don't have the FoF > accounts in front of me now, but I'm sure that what (regular or > shadow) banks owe to each other is not that big a deal. And then, > those amounts (largely) cancel out if you consolidate the balance > sheets for the entire U.S. banking system.
The regular banks is not a big deal I agree but the shadow banks are definitely a concern for two reasons. One is simple fairness: what public interest is being served in giving taxpayer money to these entities? The second reason is that these entities are not obliged to keep their money in circulation by making new loans, so the bailout money doesn't even have a stimulating effect. Indeed many hedge funds are returning money to their investors even if they were profitable recently. See for e.g.: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMcIl5jiBLFA Also institutions like PIMCO (and no doubt many hedge funds) are profiteering off the TARP by engaging in what can only be described as "bailout arbitrage": http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.GhHhNuhJcg ------------------------------------------snip Bill Gross's decision to back out of a $38 billion bond swap for GMAC LLC debt is paying off for his Pacific Investment Management Co. investors now that the U.S. government has bailed out the auto and mortgage lender. Pimco, manager of the world's biggest bond fund, reneged on a Dec. 15 agreement to join an investor group participating in GMAC's debt swap and ignored warnings that bankruptcy might follow. While holders led by Dodge & Cox accepted as little as 60 cents on the dollar to reduce GMAC's debt, the bonds Pimco kept soared as much as 83 percent, to 80.5 cents on the dollar, after GMAC won approval to become a federally backed bank. -raghu. -- Two fish are in a tank. One says to the other, "Do you know how to drive this thing?" _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
