US To Prop Up The Bad Debt Economy Using Big Banks Cash

It seems the Canadian Dollar parity has ruffled a few spooks for Halloween! The US Treasury is going to broker a scam, er, deal which forms a shell company, er, fund to absorb bad debt [e.g., mortgages] using contributions from the three biggest banks. They’ll just issue Junk Bonds, er, promissory notes or CD’s [“Commercial Paper”] to finance the “absorbing”.

Well, we wish them luck stalling the inevitable!

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WASHINGTON, Oct 16 (Reuters) – U.S. Treasury Secretary Henry Paulson on Tuesday reiterated that he believed a strong dollar was in America’s interests, in remarks aimed at his colleagues in the Group of Seven who will meet here on Friday.

“In terms of the upcoming G7 … the strong dollar is in our nation’s interest. I have said repeatedly that, and currency values should be determined in competitive markets, based on underlying economic fundamentals,” he said in response to a question after a speech at Georgetown University law school.

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Oct. 16 (Bloomberg) — U.S. Treasury Secretary Henry Paulson’s plan to shore up asset-backed commercial paper is drawing criticism from free-market advocates, who say it risks shielding banks from the consequences of poor decisions.

Paulson’s team brokered negotiations between the country’s biggest banks that led to the creation yesterday of a fund to help revive the asset-backed commercial paper market. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. agreed to establish the fund after a month of talks with Treasury aides.

“It is disappointing,” said William Niskanen, chairman of the Cato Institute in Washington and a former member of President Ronald Reagan’s Council of Economic Advisers. “It does go against the Bush administration’s preferences. Like all bailouts, it creates a moral hazard problem. I’m unhappy with situations like these.”