America Funding... Chinese PPIP? WTF?!
The Big Picture:
Dick Bove points out this is insane:It is being reported that China Investment Corp (CIC) intends to purchase $2 billion of AAA rated, distressed mortgages in the United States. The press reports are suggesting that CIC is presently interviewing 9 American money managers.
These managers have been approved by the Treasury to participate in the PPIP program as servicers. CIC will pick one or perhaps two to manage its investment program.
Note that the PPIP program:
Has the Treasury matches whatever a private investor puts up, then credits 6X as much capital. So if the Chinese are buying $2 billion, the US puts up $2 billion, and then the PPIP allows the purchase of $24 billion of distressed assets in the open market.
All for $2 billion dollars. Oh, and the FDIC would guarantee the debt being issued by the PPIP.
Hence, taxpayer dollars are subsidizing Chinese purchases of U.S. assets at a discount.
Insanity is a great word for it. But as someone else so astutely pointed out to me a few weeks back, this is why we keep pumping funny money into Fannie and Freddie - we sold their crap to China, now we've got to keep them happy lest they unleash those $2 trillion back to our vaults. The taxpayer is already getting screwed, why would they start paying attention now?
Then again, the Chinese subsidized our SUVs and flat screen TVs for years so maybe this is just payback?