Like we said, the basic problem with the PPIP is it overpays for lousy assets. But that’s not the program’s only problem.
The real problem with the PPIP is banks are holding toxic assets way above market values, Yves Smith writes at naked capitalism.
“The problem is not the salability of said assets, it’s that they don’t like the prices,” she says, which helps explains why the two previous efforts to get toxic assets off of bank balance sheets have failed.
“The only way the plan works is if someone overpays,” Smith says. “The only party that might have reason to is Uncle Sam. The whole point of the ‘public private investment’ part of this is to disguise the overpayment. So the plan is an opaque subsidy to the banks.”