Today I'm pondering the old adage "buy low/sell high". In this case as it applies to toxic asset speculators looking for arbitrage gain from buying troubled assets low hoping to reap gains selling same to the government high. That's a whopper of a gain for the club members who can pony up the ante, something that most taxpayers who are funding the public side of the PPIP cannot.
So here's a what if. What if the regulatory implentation of things like the PPIP were set up so that the government would only buy troubled assets from documentable non-speculators for say the first year of the program. This would focus taxpayer dollars towards flushing toxic assets from the operating institutions most in need of capital stress relief.
Then to further benefit the public what if the agency managing PPIP implementation followed a path where assets purchased for speculation would not be looked at until they seasoned a minimum 12-months holding period. This would allow truly skilled pool holders time to cherry pick promising items from the mix prior to disposal. The PPIP could also require the remainder collateral pool to be marked at the seasoning date prior to being purchased into the program. This would seem to be the right thing to do instead of relying on factors of a spreadsheet ... again.
Just thinking out loud.
- DS
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