Sep 28 2008
∞
“ This is a plan that assumes that the government can buy enough bad debt at above market prices to bail out the banking system. Since as long as the government is willing to spend above market prices (and by market I mean “what other banks would pay for this crap”) banks won’t sell it to each other, the government has taken on an open ended obligation. If the pile isn’t that large, then a trillion or so may be enough. But if the pile is much larger than that, and it is, then the government will have to keep ponying up money over and over again. It won’t be limited to the original 700 billion, or trillion, or whatever. It will be an ongoing program that the market will become dependent on.