Fraud

Yves has the inside line on the $700B bailout. It's, as is obvious, a mechanism to recapitalize investment banks using taxpayer money (with no taxpayer ownership). Banks need to be recapitalized, as they are insolvent.

Anyway, I wanted to let you know that, behind closed doors, Paulson describes the plan differently. He explicitly says that it will buy assets at above market prices (although he still claims that they are undervalued) because the holders won't sell at market prices. Anna Eshoo pressed him on how the government can compel the holders to sell, and he basically dodged the question. I think that's because he didn't want to admit that the government would just keep offering more and more.

If the government does not buy these assets at above market price, the Paulson plan is pointless, because it does nothing to address the fundamental insolvency that is at the heart of the financial crises.

On the topic of fraud, here's a NYTimes article on the wealthy, disabled, and retired LIRR employees. Note that the word "fraud" appears nowhere in the text.