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WaMu tries to lend $9,000 to Cliff105 at subprime

Robert Waldmann

notes a bit of financial news that must be read to be believed.

Cliff105 who is between jobs and reading about the financial crisis receives an interesting bit of junk mail.

a credit card offer from my recently failed bank, Washington Mutual.

Normally, I throw these credit card offers into the recycle bin un-opened. &As every school kid knows, the credit market is so tight in America right now millions of people are on the verge of losing their jobs because businesses can’t get any money from the “seized up” financial sector.

America faces a “once in a lifetime” major crisis of enormous dimensions, or so I’ve been led to believe.

For laughs and giggles I checked out what The Bank Formerly Known As Wamu had to offer: more than 9 grand at 1.99% APR until next August, with an upfront finance charge of $150 (about 1.6%).

Read the whole post. It is beyond belief.

Ah so that’s how bankrupt banks act during a credit crunch.

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Mark to Market Accounting

Robert Waldmann

is about to share his ignorance on banking, banking regulation, accounting, And accounting standards all in one post.

You know the end is near when ordinary people get interested in accounting standards.

A wide variety of politicians have decided that the problem with the US financial system is Mark to Market Accounting. It is tempting to argue that this is equivalent to arguing that closing our eyes will make the problem go away. However, there is one way in which accounting standards can create a crisis. It is through the interaction of accounting standards and capital requirements. Capital requirements are a way in which the numbers written on a balance sheet have real effects even if everyone knows they are made up.

So one could argue that the problem might be mark to market accounting if one were ready to argue that the problem is due to capital requirements. I’d say that is crazy. For one thing US investment banks didn’t long survive the relaxation of capital standards for US investment banks (held out about 4 years IIRC). For another its crazy.

However, there is a particular way in which mark to market times capital requirements can create a crisis. Paul Krugman called it a systemic margin call.
When the value of assets held by banks falls, the difference assets minus debt declines. Capital requirements imply that banks must reduce their total debt by selling assets and paying it off. Thus when the price of assets owned by banks declines banks sell those assets. This creates a downward sloping supply curve for the assets which can make multiple equilibria possible with one in which the capital controls are binding and prices are low and one in which they are not binding and the asset prices are high. The first equilibrium is Pareto inferior to the second and we seem to be in it.

So what is to be done ? I don’t think that eliminating capital controls or making them depend on made up prices is a solution. They were introduced because the same thing can happen at assets minus debt equals zero and then bankruptcy. A purpose of capital controls is to allow regulators to seize banks when the cost of liquidating them is still small. Notably investment banks have capital requirements on the REPO accounts of their clients (typically 2% I think but the investment bank knows what’s happening even before the client does). You’d have to be an idiot not to.

I think the problem is that banks decided to go close to the limit ignoring the risk in new instruments. Basically, I see a problem with allowing a bank to get as close to a line that it must not cross or it might be seized and liquidated while the CEO is in an airplane (al la WaMu even though that was triggered by liquidity requirements not capital requirements).

So I think there should be multiple levels of punishment for bad capital ratios. At a ratio of notionally 8% the bank can be seized. But if the ratio falls below 10% during a year no dividends or bonuses can be paid that year. This is painful enough that banks will try to stay well above 10% but they won’t go into a liquidation vicious cycle if they hit 10%.

The idea of no bonuses is that the dollar value of all payment for services under contingent contracts must be equal to the lowest possible value which means for example, if people are paid in shares or options they get $0 worth of shares or options.

The idea is a punishment so bad that bankers will act so as to make the subjective probability negligible (which we now know corresponds to an objective probability way higher than we should accept) but not so horrible that they will drive the bank bankrupt if they touch the line.

Maybe no bonuses is enough that the bankers will just blow up the bank in rage. If this is a concern a 70% tax on bonuses would probably work fine.

update: Hilzoy has an excellent discussion of the issues and (minds think a like) concludes that, if there is to be reform, there should be reform of capital requirements not accounting standards. She is a bit casual about relaxing capital requirements given what happened the last time that was done (2004 for institutions called “investment banks” which now don’t exist).

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What Is to be done ?

Robert Waldmann

OK what now ? Unless someone has just submitted a post, AngryBear doesn’t have a post on what to do now that the House Republicans (and some Democrats) have voted down the Paulson-Dodd-Frank bailout bill.

The contingent consensus of the Left Blogosphere seems to have been to go for the Swedish solution if the Paulson solution is rejected — that is nationalize banks with inadequate capital. I think this is still politically impossible. Even if the Democrats go alone and Bush is afraid to veto, the blue dogs will be blue dogs.

I think 2 complementary and more moderate proposals might pass over Republican objections and save the financial system. They are, of course, exactly what I have already proposed here and here.

First preferred shares. Economists of all ideologies agree that what the banks need to do now is increase their equity by selling shares. No one much wants to buy so if they sold a lot the shares would be very cheap. I think a bill which allows banks to sell a lot of preferred shares to the Treasury and makes sure that the Treasury will lose money only if the bank goes bankrupt might make enough sense to people who aren’t even me, that it would be a political winner. See the old post for details.

I add one clause — a contingent surtax on the rich. Withold an extra 10% of income over $1,000,000 and, each year, return the part that wasn’t needed to cover losses in the Buffet X 100 plan (plus the chained 3 month t-bill interest rate). This is very much in the interests of the rich as they will get their money back and the financial system will be saved. The under a million crowd will be protected.

Also squabbling over exactly what to do with the profits that the Treasury will make might convince people that there will be profits (I think there will be if the purchase is at share prices as of today September 30).

The other is Toxic Sludge Inc. This is a mandatory program in which the Treasury contributes 0 dollars (sky divers holding hands and thinking they are pulling each other up in Drum’s words but it might help). The proposal would be to require all owners of mortgage based assets to contribute those assets to the new entity in exchange for shares proportional to the current market value of the assets.

The point is that it is easier to price the whole pool of toxic waste than each droplet so the shares of toxic waste Inc will be traded and, I hope, for a reasonable price. Also Toxic Sludge Inc will be able to reassemble whole mortgages and authorize mortgage initiators to re-negotiate if it is more profitable than foreclosure.

I think these ideas might be popular enough (both have guarantees that they cost most people nothing and don’t add to the deficit long term) that the Democrats can afford politically to pass them over Republican objections.

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How did Lehman manage that ?

Robert Waldmann

A commenter over at naked capitalism notes that

$110b of senior LEH debt went from trading .95 to .12 in a matter of days …. If you include the less senior debt that is trading at essentially zero, LEH had $110b hole in its balance sheet. And just days before this, the market was being told and was believing that the $10b disposition of Neuberger was going to solve their funding problems.

Now is there a precedent in this history of bankruptcy–excluding cases of accounting fraud–where bonds collapsed like this once a bankruptcy court opened up the books? I’m thinking the answer is ‘no.’ Which then makes you re-evaluate the premise that there wasn’t fraud at LEH in marking the value of their assets.

Now I may be crazy, but I think that the idea that accounting fraud is required to achieve this is old fashioned and out of date. I think it can be achieved without breaking the laws, such as they are.

Lehman could have made their senior debt worth 12 cents on a dollar in case of default by selling CD insurance on their own debt — lots of it. This would not require any false accounting as they are not required to report this fact.

Now I would be reluctant to believe that a bank could insure its own debt if it hadn’t already happened .

The trader then went on to tell me that Commercial Bank of Korea would sell credit default protection on bonds issued by the Commercial Bank of Korea.

Who would buy a CDS on Lehman from Lehman ? Only a fool ? Well I have another candidate — someone who had bought lots of cash settlement CDSs on Lehman debt from a third party. The payout on a CDS depends on par value minus settlement value. A huge amount of Lehman insurance of Lehman is not very useful to someone who wants to hedge, but it is very useful for someone who wants Lehmen to settle for as few cents on the dollar as possible because, he or she has bought Lehman CDSs from a third party.

Now to Lehman, insuring their own debt is a very very attractive proposition. It is money for nothing unless they go bankrupt and if they are bankrupt well they are bankrupt. The whole source of moral hazard and adverse selection in credit markets is that it doesn’t matter to the debtor how much he goes below zero.

A positive price for Lehman insurance of Lehman makes sense (algebra will be after the jump when I type it up). There was money to be made at the expense of holders of Lehman debt who didn’t think of the possibility of over-insurance.

Is this what happened ? I have no idea, but I guess we will find out fairly soon.

update: My claim about reporting requirements has been contested. I should stress *again* that I am not an expert and add that I know jack about accounting standards.
I have learned a lot from comments here and at crooked timber. I reply at tiresome length in comments at crooked timber and at my home blog.

As far as I can tell firms must report the total fair market value of CDS written as liabilities, but this is not what matters to bond holders. To them liabilities matter only to the extent that they cause bankruptcy and/or affect the value of liabilities or assets in case of bankruptcy. Knowing the expected value of a liability which is worth zero the 99.9 % of the time in which bond holders just get interest and principal and a whole lot the 0.1% of the time in which Lehman brothers is liquidated is of little use to bondholders. Also, as John Quiggin notes, accounts are not published continuously and our latest information on Lehman Brothers appears to date from May 31 2008 which was a while ago.

First a CDS on LEH issued by LEH is definitely not worthless. It can’t possible pay out as described in the terms of the contract, because it only pays when Lehman defaults, but it can pay its stated value times the cents on a dollar payout ratio found by a bankruptcy court. Even in the case of LEH,this will be positive.

Now algebra. I will assume all debt is equally senior. The par value of LEH debt is 1 (for simplicity). They go under with assets equal to y (which must be less than 1 for them to be bankrupt). the payout ratio phi is equal to assets over total liabilities. However the liabilities are not just debt. They include self CD insurance for x units of par which, in theory shold pay x(1-phi). Actual payment on the CDSs is .

phi is given by
1) phi = y/(1+x(1-phi))

Note that phi is not zero, so the CDS has positive value — you don’t have to be crazy to buy it.

This gives a quadratic equation with one solution to phi between 0 and 1

2) phi = (1+x – ((1+x)^2-4yx)^0.5)/(2x)

phi is definitely real and positive. 2 can be rearranged to

3) phi = (1+x – ((1-x)^2+4(1-y)x)^0.5)/(2x)

And y
taking a first order approximation alpha is approximately equal to

4) phi is roughly equal to y/(1+x)

Which is positive.

So total payouts on CDSs are

5) x(1-phi)phi= xy(1+x-y)/(1+x)^2

And the ratio of the payout to the face value is

6) payout/x = y(1+x-y)/(1+x)^2

oh this is odd. take the derivative of the payout/x with respect to x

7 d(payout/x)/dx = y[(1+x)^2-2(1+x)(1+x-y)]/(1+x)^4 = y(2y-1-x)/(1+x)^3

So the payout per unit of self CDS increases in units of self CDS outstanding until the number of units, x is equal to 2y-1. For LEH senior debt, imagine the accounts were accurate (as far as they were supposed to go) and y = 0.95, the value of LEH self insurance would increase in LEH self insurance outstanding until the amount was equal to 90% of total LEH senior debt. That seems to me to be an unstable market.

Now how high would it have to go before it stops making sense to buy CDS from LEH ?

Well that depends on the price doesn’t it. If normal investors like Janet Tavakoli won’t touch it, the price could be very low, say one tenth as much as third party insurance. That would make it optimal to a price taker so long as alpha is greater than 0.1. Obviously I chose 0.1 out of my hat, because it is close to current market estimated phi of 0.12.

Could this have happened ? I don’t see why not. As far as I know it was all legal and profitable to both parties in the contract.

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Financial Arsonists ?

Robert Waldmann

Many people are using the term “arsonists” as a loose metaphor for people who share the blame for the current financial crisis. They aren’t suggesting that anyone actually wanted a financial crisis. Cocking my tinfoil hat I will note that it is entirely possible that someone has been making out like a bandit — and might even be one (as far as I know almost legally). I stress as I have in these posts that I am ignorant and might be totally confused.

I remember when arson was a big profit center in New York. Many buildings in crime ridden neighborhoods were grossly over-insured, so, in case of fire, the owners received much more than the value of the building. Oddly there were many many fires.
The burning of New York was brought under control when the over-insurance was eliminated.

Currently, credit is a bit over insured. The amount to be paid if all insured debtors default is over $ 50,000,000,000,000 which is much greater than the total face value of insured credit.

Now the most likely explanation for this is that credit default swaps are an unregulated form of gambling which appeals to arrogant people who are convinced that they can beat the market — that they are side bets by people with different optinions on the probability of default or, more likely, future assessments of the probability of default.

However, over-insuring against risk can be very profitable.

Consider the partners of a partnership Bandit, Arsonist and Thief. What if they buy 2 dollars of credit default insurance on their bonds for every dollar of equity (note no regulation no disclosure requirements) then enter chapter 11 ? They make out like bandits. Now entering chapter 11 for no good reason creates suspicion, but, if you want to go bankrupt there are always people eager to help.

Or how about an evil banker who buys credit default insurance on a client firm having some difficulties then calls its loans and shuts off lines of credit ? I’d say there are a fair number of bankers who can force a fair number of firms to default.

Finally best of all, how about Bandit, Arsonist and Theif’s banker ? Working together they can create a cash flow problem, a chapter 11 filing, a big payout and a workout so Bandit Arsonist and Thief keep their firm and make out like bandits.

Unregulated insurance is a license to steal.

Does this explain the odd behavior of Bernanke Paulson and the Big Bad bankers ? Bernanke and Paulson have been arguing that they have to entice banks into agreeing to a bailout. Huh ? Could it be that the banks in question have bought so much credit default over-insurance that if one of them fails the total capital of all of them increases, because the disruption would be less than the value of over-insurance ? Or how about officers of the banks whose wealth is in blind trusts ?

Now a lot of these credit default policies will never be paid up, because the insurer will be bankrupt, but a lot will be and there is no limit (of which I know) on how much banks and their officers can legally buy and they can afford a huge amount.

Recall Ben and Hank have opened an $85,000,000,000 credit facility for AIG. Is it possible that, in the absence of the bailout, all of that money will go to owners of AIG credit default swaps ? Can the US Federal Government really put a subsidiary into chapter 11 ? If that is inconceivable the logic would be “better to pay 700 billion for stuff worth 650 billion than $85 billion for nothing.”

update: I am trying to follow the White House meeting bailout circus. It is obvious that McCain and the House Republicans kicked over the negotiating table proposing a magic free lunch plan at the last minute so they can vote no on an unpopular bailout and claim they could have saved the financial system a not cost. It is clear that McCain is an unpatriotic totally selfish reckless egomaniac. In fact, I doubt that Paulson is used to dealing with such a totally selfish reckless egomaniac given his background as an investment banker (and I never expected to write that).

However, it took me a while to figure out just how flaky the House Republican pony plan is. Of course they want to cut the capital gains tax and deregulated more (I think they didn’t put in drilling in ANWR or threatening to bomb Iran). However their main idea is that what the US financial system needs is *more* credit default insurance, since $ 50 trillion isn’t enough !!!

On Thursday, a small group of conservative House Republicans — including Texas’ Jeb Hensarling and Virginia’s Eric Cantor — offered their own alternative to the Bush proposal. Focused on mortgage insurance, the one-page alternative plan was presented to reporters at a briefing.

The plan calls for the U.S. government to offer insurance coverage for the roughly half of all mortgage-backed securities that it does not already insure. The Treasury Department would charge premiums to holders of the securities, under the plan.

OK now explain to me how that would have saved AIG ?รน

I don’t know if financial arsonists are a significant factor in the crisis, I don’t even *know* that any exist. However, there is no doubt that political arsonists are a huge problem.

update II: Look I’m ignorant. I don’t know anything about new financial instruments. However, I can’t manage to find any reason to doubt that the House Republicans’ plan would destroy the US financial system. If all mortgage backed securities are insured by the US government, which will not go bankrupt any time soon, many many agents will be over-insured so that they would benefit from defaults and some will be in a position to cause defaults. They will have to cause huge transfers among private agents and huge financial distress costs in order to get their public money and that won’t stop all of them.

Also, as with buying assets, the problem is the price, in this case the premium. If it is vastly less than the probability of default, the House Republicans have found a way to throw money at bankers and financial arsonists instead of just bankers. If it is actuarily fair, it will force liquidity constrained firms to unload the securities — they could wait and hope for no default, but they can’t pay actuarily fair premiums. When you are insolvent, risk, variance, double or nothing is your only hope of survival. Thus aside from the contribution to financial arson (which I guess will be huge) the plan would also force distressed banks etc to unload mortgage backed securities at fire-sale prices. Now I don’t think the current problem is mainly due to systemic margin calls due to mark to market and capital requirements, but making that problem vastly worse would hasten the collapse of the US financial system even without financial arson.

Vladimir Lenin is kicking himself in his grave for not thinking of such a simple way to destroy capitalism.

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If Warren Buffett can do that why can’t we X 100 ?

Robert Waldmann’s Pony Plan.

This plan is modeled on Buffett’s deal with Goldman Sachs. It is also based on arguments by Doug Elmendorf and Luigi Zingales. I may show how good ideas from smart people can be sliced and diced to make toxic foolishness.

One reason the deal had an impact is that it was a signal that Buffett thinks that Goldman Sachs was, at most, $ 5 billion in new capital short of sound. The remaining banks in trouble are less sound (I assume Buffett knows what he is doing) and those who participate in my plan will be the least sound banks.

That said, I think that a lot can be accomplished by issuing new preferred shares to the Treasury.

I’d say the deal is
1) banks can issue preferred shares to the Treasury worth up to 1% of their total assets.
2) These shares pay a 10% annual dividend.
3) the Treasury gets an equal number of warrants to buy common stock at its price as of when the bill passes.
3) At any time t, the bank can buy back any or all of the preferred shares for the original price plus interest equal to 2% per year plus the linearly interpolated average of the treasury bills issued when this bill passes and maturing just before and just after t
4) While any of the preferred shares are outstanding, for each employee, consultant or person who provides any service for pay, the bank must transfer to the treasury the greater of $0 and half of the difference between that person’s total compensation and $ 400,000.

Why would this work? The new equity would improve banks’ capital ratios. Given the law as it is and should be, capital is assets minus debts and equity doesn’t enter.
The risks to the Treasury are 1) that the bank will fail and 2) that it will never pay dividends so the preferred shares are worthless.

Probably, few banks would pay the huge dividend, therefore they would not be allowed to pay dividends on common stock. The 10% dividend is a price the bank has to pay to the treasury for the privilege of paying dividends on common stock. Even the most impatient shareholder must understand that it would be better to buy back the preferred stock first. Thus, while wholly voluntary and using a standard instrument (preferred stock) the plan would discourage banks from paying dividends causing them to build up capital.

Clause 4 is not populist vengeance. My guess is that even investment bankers trust each other enough to keep track of unofficially assigned bonuses, so that when they are finally free of the preferred shares, they will get bonuses based on performance during the period clause 4 applies. This has the effect of making officers of banks loan money to the bank when the bank really needs money. It also penalizes them for not repurchasing the preferred shares. In particular, informal promises to pay are attractive to corporate predators who profit by violating implicit contracts. The combination of no dividends on common shares and implicit debts to managers would make the banks very attractive takeover targets. This would create an incentive to buy back the preferred shares.

The 2% extra interest which must be paid no matter who is secretary of the treasury is partly to cover the losses from banks that fail and partly to get all that the market will bear for the Treasury.

The phrase Pony Plan TM belongs to Atrios. Illustration after the jump.

Photobucket

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The Buffett Buffer

Robert Waldmann

Major financial crisis news.

Goldman Sachs Group Inc. said it will get a $5 billion investment from billionaire Warren Buffett’s company, marking one of the biggest expressions of confidence in the financial system since the credit crisis intensified early this month.

Look $5 billion is not just a vote of confidence.
Goldman Sachs is in good shape *now*. Goldman’s balance sheet just improved, because they have $5 billion more in assets and no more debt (Buffett bought equity).

update: I should have noted that $ 5 billion increases G-S total equity by about 10% as you can guess from the details of the deal.

Goldman Sachs
47,563.75 Market Cap(Mil)


That would be about 0.5% of total assets.
hardly just a pat on the back.

Via Kevin Drum

Rabid Buffett envy below the fold. I did say there was a killing to be made saving banks.

My guess is that he will make a killing (again) as G-S equity was already underpriced (panic you know) and is now worth more, because of him.

And what a deal he drove

The deal is structured in two parts, giving Berkshire a stream of cash and potential ownership of roughly 10% of Goldman. Berkshire will spend $5 billion on “perpetual” preferred shares of Goldman. These are not convertible into equity but pay a fat 10% dividend.

Berkshire also will get warrants granting it the right to buy $5 billion of Goldman common stock at $115 a share, which is 8% below the 4 p.m. closing share price Tuesday of $125.05.

Wow 10% plus warrants. Now G-S won’t go bankrupt, as they have no legal obligation to pay a dividend on the preferred shares, but they can’t pay a dividend on common stock until Buffet gets his $500,000,000 a year.

OK so now Morgan Stanley. They are probably in worse shape than G-S but I’m sure a deal can be made. Problem is that there is no one with as much free cash as Buffett and as much brains (maybe or not and). Still I think he might tell his friends Bill and Melinda that there is money to be made saving Morgan Stanley from itself.

If there not interested Morgan Stanley’s hopes of independent survival are Slim.

My guess is that he looked at the killer deal Ben and Hank made with AIG and said to himself “I can do that too”.

This also relieves Paulson’s conflict of interest. I wonder if his attitude will change.

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Credit Default Swaps Again

by Robert Waldmann

My post on “what the hell are credit default swaps for” got lots of comments and I learned a lot from the comment thread.

I continue my effort at remedial education via blogging.

First a very simple article by Martin Hutchison

Does this guy know what he is writing about ?

Key quote

Banking regulations and the lack of funding requirements for CDS: Banks are required by law to hold a certain amount of capital for loans they make – about 8 cents for every dollar in principle, but there are a number of loopholes that allow it to be less for certain types of loans. But there are very limited capital requirements for CDS, so banks and other CDS market participants can take on much more credit exposure through CDS than they could directly.

Oh my. So entities which are not allowed to invest in bonds other than high rated bonds can do that by buying credit default insurance from a firm which absolutely won’t be able to cover a wave of defaults. Craaaaaaazy

In my state of pure tabula rasa ignorance, I have been googling and I haven’t found anything on US regulation of CDSs. However, European banks warn that they won’t be able to keep up with US banks if they are regulated

Banks oppose plan to raise capital requirements on CDS

SIFMA Global SmartBrief | 09/10/2008

The European Commission’s proposal to increase capital requirements on instruments, such as credit-default swaps, is facing heavy opposition from the financial industry. SIFMA and the European Securitisation Forum, an affiliate of SIFMA, were among a group of banks that issued a letter saying the plan’s “fundamental flaws” will hurt risk management and put a crimp on financing. “It will damage the competitiveness of Europe,” the groups said in a letter to Charlie McCreevy, European commissioner for internal market and services. Bloomberg (07/17)

Poor boring European banks can’t have all the modern with it US excitement. If that is a smart brief I sure don’t want to read their dumb briefs.

I am trying to find out what CDS exposure does to a firm’s credit rating.

Unsuccessfully trying.

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Fannie and Freddie Capital Requirements Lowered in March

by Robert Waldman

I missed this at the time.

* MARCH 19, 2008

Fannie, Freddie Lending Power May Rise
By JAMES R. HAGERTY and DAMIAN PALETTA

The regulator for Fannie Mae and Freddie Mac is expected to announce a plan this morning that will give the government-sponsored mortgage investors more scope to prop up the home-mortgage market.

The plan involves a reduction in capital requirements for the companies and a promise by them that they will each raise several billion dollars of capital this year, likely through a sale of preferred shares, according to several people familiar with the situation. As a result, they are expected to be able to provide additional funding of as much as $200 billion for home mortgages and related …

That was bright. Now I know that Fannie and Freddie aren’t the heart of the problem, but McCain claims otherwise. I wonder why he had no problem with this one (actually I don’t think he knew about it either but he’s the one who says he knows how to solve the financial crisis).

Via OptionArmageddon who called it right at the time.

Oh and remember, I found this photo for Paul Krugman

banking regulators and bankers

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Paulson’s Skin in Paulson’s game

Henry Paulson promises that he will spend the 700,000,000,000 of our dollars over which he wants total control wisely. I say he be required to put his money where his mouth is. Ask him how much he expects them to be worth after he has spent them on mortgage backed assets and tell him he pays 1/1,000 th of losses beyond that up to 10 million (he has them) and gets 1/1,000 th of all profits (that is if we end up with more than $ 700 billion he keeps one one thousandth of the difference.

He would get even paler if his money were on the line.

Also, I think if any firm sells stuff to the treasury, the officers of that firm should be required to put up 1% of the money and get 1% of the revenue generated by the assets their firm sold and 1% of proceeds from sale of those assets.

That way, if they are good stewards of their shareholders wealth, they will still dump their worst junk on the treasury (and pigs will fly). Otherwise they will try to unload at fair value (if they make a profit they get sued. If they make a loss for the treasury they hurt their pocket books).

over at dailykos you can vote on this proposal.

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