Using TARP to boost the ABS markets

I think every day Paulson wakes up and realizes he only has XX number days of this nightmare left. He speech earlier this week is intriguing to say the least. I suppose the government may become an "investor" looking to buy ABS bonds to jumpstart the market. This will hopefully be good news for issuers of auto, student, and credit card lending.

I have heard rumors of a couple of auto backed deals coming to market from captive sources next week. These deals may become the barometer going forward, even without the government participating.

Also, I read an article that BO wants to appoint an "automobile czar." I assume this means any bailout plan would be administered through the office. I cringe at the thought of the Government trying to manage this industry as clearly it can be no better than the private industry has done for years. Where have all the leaders gone? Maybe Iaccoca is up for the job. Will this Czar also be out there buying auto-backed ABS's? It is incredible how the government is growing, even 2 months before BO takes office.

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Permalink Reply by Victoria Fierson on November 14, 2008 at 10:06am: Scott,

I think this relates to a dialogue I was having with another member concerning the auto industry bailout. We were discussing the sense of urgency placed on the auto bailout and whether or acting now or two months from now will make that much of a difference.

An "automobile czar?!"I think that's another empty thought -- like the asset repurchasing program. More than anything I think the government's main focus right now is damage control across the board. Appointing a person or setting up an office within the industry to oversee and regulate should come after the financial markets are healed. None of this is going to be 100% better now or in two months. Setting up a regulatory structure within the auto industry should come after things have stabilized.

I'd love to know more about the auto backed dealers you mentioned.; ▶ Reply to This

Permalink Reply by Scott J McKim on November 14, 2008 at 10:20am: Well, the more you overtake the plumbing, the easier it is to stop-up the drain. When that happens, most people would shut off the water, not add more. The government's attempts at damage control are similar to adding water.

Economics is a funny thing. It becomes quite hysterical when it is manipulated. I am beginning to think the only real fix for this mess is to let it sort itself out. Yes, that will be very painful, but these attempts to band-aid the problem are only delaying the inevitable by weeks or months. Furthermore, waiting months may lead to a better solution. Capitalism is about survival of the fittest. If GM fails, it is by their doing. I don't want it to happen, but I also don't want to throw taxpayer money into the hole. I have read the doom and gloom to be expected if GM were to fail. Most of that is probably reality but after the dust settles, the industry may be stronger. Or it could go the way of the British Car Industry.

Not very helpful, but real resolution seems elusive. We have charged full bore into socializing the corporate world this year and that tap is not being shut-off anytime soon.; ▶ Reply to This

Permalink Reply by Victoria Fierson on November 14, 2008 at 10:37am: You raise great points.

It does seem like we (meaning government) tend to resolve a problem by throwing money at it. We are running out of band-aids. I agree with you that if GM fails it is by their own doing and taxpayers should not be expected to pony up more of their hard earned money to support something that government thinks might work. Going beyond that however, I think the real question is will the implications of letting one of the "Big Three" or all of the "Big Three" fail be worse than paying more money right now? We have yet to identify the bottom to all of this. What happens when all of those employees lose their jobs and unemployment rises, where will we be then? Will that even happen? And round and round we go.

There is no doubt that the industry will be stronger after the dust settles and hopefully everyone will learn from the massive mistakes made.; ▶ Reply to This