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ehanneken's Archive on Oct 03, 2008
Description
This is more like "the secret future of the bailout." Michael Flynn predicts that politics and conflicts of interest will sour the implementation of an already bad idea.
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To paraphrase Mencken, this solution is neat, plausible, and wrong. The first failing is something that is only now being openly stated: Treasury expects to pay some unknown premium above any current market price for mortgage-backed securities (MBS). We don’t know what the premium will be nor how it will be determined. Well, in a sense we do. It will mostly be determined by politics, not economics. This is the foundational flaw in the Treasury plan.