A trillion here, a trillion there...

Can someone please send our Treasury Secretary, Timothy Geithner, away for the weekend? Every weekend he spends in Washington costs us a bundle of money. There are 300 million people in the U.S. with about 100 million households. Every time Tim Geithner opens his mouth to announce another trillion dollar giveaway, the average household is $10,000 more in the hole, and the average taxpayer a lot worse off than that.

As far as I can tell, the latest one, the March 23, 2009, Public-Private Investment Program, looks to me to be the biggest giveaway in history...again. Read the treasury department's fact sheet. As I understand it, the government (that's you) will lend money to specially qualified investors (i.e. their friends) to purchase "toxic" assets that banks want to unload. Here's the good part -- for these special investors. They only need to put up $1 of capital at risk for every $6 they borrow to buy the "toxic" assets.

Where does the partnership part come in, you might ask? Well, that's the funny part. These special investors will borrow money to buy the toxic paper from the public markets, but the government will guarantee these loans, secured by the possibly worthless paper. Should the special investors lose money on these assets, the government (again, that's you) will pay off the loans. Should they make money on these assets -- hey, great news! They get to keep it!

In the interest of full disclosure, I will point out that the government will also buy 1 out of every $8 in assets with the possibility of making money, too, should these assets turn out to be worth something in the future. But of course, the government will also bear the full exposure to losses on this paper.

Here are two related data points to back up my contention that this is a great giveaway deal. I read somewhere on Monday morning (Wall St. Journal, I think) that The Blackstone Group (BX) (among other named companies) would be potential investors. After reading that, I decided to watch BX stock price -- up 18% end of day Tuesday (and up further after hours). I also happened to catch a TV interview with BX head of fixed income investments (he manages $400B). The guy was absolutely giddy over the prospects, practically salivating right there on TV! Yes, he will likely make a lot of money on this deal -- and if he doesn't, don't worry, you'll pick up 6/7ths of the tab.

On another humorous note, I watched an interview with James Galbraith, Prof at U Texas (son of famed John Kenneth Galbraith). Being the brilliant fellow I expect he is, he brought up a brilliant idea. If I got this right (and I'm pretty certain I did) he expects the banks that own the toxic assets to put the worst of them up for sale and if nobody else buys them, they would buy them through an intermediary so we won't realize what they did. Should the toxic assets later prove worthless, as expected, the poor overburdened banks will no longer be responsible for them. They will now belong to you. Congratulations! So the banks will get to eliminate the assets from their balance sheets in terms of the possible losses they entail, but will actually get to keep the profits should they become profitable. What a deal!

Carl Rove was supposed to be the evil genius, but he's now old news. The new title has to go to Tim Geithner. Knowing full well that he couldn't just spend a trillion dollars buying the toxic assets from the banks -- certainly not less than a week after his role in the AIG bonus flap came out (and not two months after we discovered that he conveniently forgot to pay his taxes)...No, Mr. Geithner couldn't just spend another trillion dollars of our money out in the open. So instead he cooked up a byzantine plan to spend our money in the shadows. The best part is how he managed to hide the key facts of the plan in his half page editorial in Monday's WSJ. In the 1/8th of the article about this plan that he actually spent talking about the plan, not once did he tell us about how the taxpayer is actually on the hook for almost all the potential losses. So much for openness and transparency.

Mr. Geithner, you've been working really, really hard. Why not take a little vacation...it's on us.