Banks Plan To Bid Up Each Other’s Toxic Assets With Taxpayer Money

April 3, 2009

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So, the plan is for banks to buy each other’s toxic assets in a massive money laundering scheme, sticking tax-payers with the losses.

Banks Plan To Bid Up Each Other’s Toxic Assets With Taxpayer Money (GS, MS, BAC, C)

By Joe Weisenthal at ClusterStock

We told you this was coming.

FT has learned that the major US banks, Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS) and JP Morgan (JPM) are all interested in buying toxic assets from one another, using the massive leverage provided by Tim Geithner’s public private investment partnership.

This was a possibility folks saw coming from the first day, and amazingly, Sheila Bair has said she’s open to this kind of money laundering.

And let’s be honest, that’s exactly what it is…

More here.

Money Laundering: The process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.

Bailed-out banks eye toxic asset buys

By Francesco Guerrera and Krishna Guha, Financial Times

US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.

The plans proved controversial, with critics charging that the government’s public-private partnership – which provide generous loans to investors – are intended to help banks sell, rather than acquire, troubled securities and loans.

Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”…

But public opinion may not tolerate the idea of banks selling each other their bad assets. Critics say that would leave the same amount of toxic assets in the system as before, but with the government now liable for most of the losses through its provision of non-recourse loans.