Will America’s new $700 B fund take a bath?
Remember, housing prices are still falling….so it’s questionable whether this attempt at a resolution trust really has legs…..and we have little insight on where specifically the problems are with these illiquid bank assets. If the housing market stabilizes, will the Fed be able to sell much of this stuff at a reasonable price?…or is it so abstract that they’ll never find a buyer? Undoubtedly, both things are true…but in what proportion?
And think…. if you were in Congress, they are asking you to pass a bill in a few days with all of those basic financial questions unanswered? …based upon the notion ‘it’s too difficult to figure out right now, so let’s just underwrite it, and we’ll figure out what we’ve done later.’
So it looks like Ben Bernanke could either end up looking either like a genius or a failure…one thing is certain, he just jumped off the edge of a cliff with a very untested parachute.