23-Mar-09 Market Wrap - The Plan
``Anyone want to bet there aren't some dirty games that go on in this bidding process that effectively puts the capital in the hands of the bank and moves the risk to the balance sheet of the taxpayer? Just how many degrees of separation are their from private equity and these banks? Who's to say they don't bid up their own assets indirectly? It's a stealth way to capitalize the banks to the tune of $1T without having to go to CONgress asking for another round of "bailout" capital. Sure there will be legit uses of this program but can you really trust these guys any longer? Geithner is a toxic asset himself and needs to be put on someone else's balance sheet.''
NY Post reports: One Wall Street trader told The Post that what's been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.
Recently, securities rated AAA have changed hands for roughly 30 cents on the dollar, and most of the buyers have been hedge funds acting opportunistically on a bet that prices will rise over time. However, sources said Citi and BofA have trumped those bids...
Double Dipping: But the banks' purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.
Sources:
DOUBLE-DIPPERS
