Back when the Treasury announced the PPIP, some people took issue with the Legacy Loans Program on the grounds that it represented a back-door subsidy to the banks.
Well, yesterday, they pulled the plug. So perhaps I was wrong, and the actual effective subsidy was simply not enough to get the banks to participate. Or perhaps you don’t need a “put option” when the FASB lets you assign whatever value you like to your toxic assets. Or perhaps the trillions of other explicit and implicit subsidies are doing the trick.
Regardless, I am happy to see the program put on hold; it was a hideous idea.
Now about that Legacy Securities Program…
I think the fact that they only tabled the loan program suggests that they finally realized it wasn’t going to work. The banks had hardly written down the loans.