Are Citi & BofA purchasing the same junk that the new government program is designed to help them unload?
March 25, 2009
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Hmmmmmm, here's an interesting article: DOUBLE-DIPPERS. According to the New York Post, Citigroup and Bank of America have been "aggressively" scooping up mortgage-backed securities (MBS) on the open market at the very same time that the Treasury is rolling out a special program, funded by our tax dollars, to help them unload these very assets.
What in the heck is this? Are Citi and BofA trying to artificially prop up the prices of these securities before they try to unload their massive pile of them? If so, I don't see how this could fool anybody.
Perhaps they feel as though the new government program is so unbelievably generous that investors will be beating down their doors to buy these MBS at higher prices than the thirty cents on the dollar that they have been paying for them.
If so, it's a pretty scummy move. The Treasury program was designed to help them clear their balance sheets so that they are in good shape and can operate normally again. I doubt that Geithner had banks gambling by loading up on toxic assets before the plan is implemented in mind when he drew it up. Both Citi and BofA each have received $45 billion in federal rescue cash meant to help prop up the economy and jumpstart the housing market.
Deej
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