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The Stalls of Higher Thought

US Banks Already Gaming Latest Toxic Asset Clean Up Scheme

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Donklephant (NY Times): As Treasury Secretary Tim Geithner orchestrated a plan to help the nation’s largest banks purge themselves of toxic mortgage assets, Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market, sources told The Post.

Both Citi and BofA each have received $45 billion in federal rescue cash meant to help prop up the economy and jumpstart the housing market.

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.

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.

bspcommentJust how bad does this mess actually have to get before people realize that we’re all getting gamed and it will not stop until we make it stop with serious action!

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Written by mattliving

March 28, 2009 at 10:35 pm

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