I mean, in the case of Freddie Mac, the government decides that mortgages are politically sensitive and important for national stability. So, having made such a decision they can walk into bankruptcy court and make an offer to buy those assets from the troubled firm. They can do this under existing law, with no particular “bail out” other than buying key assets that they don’t trust to the harsh hands of free trade.

Having bought themselves political protection, the government can rewrite those contracts with additional clauses (whatever they think will do the job) and then sell them back into the market (presumably for less than the purchase price). Maybe hold them long enough for things to settle or sell them a bit at a time as they find someone they feel might be responsible enough to hold these assets.

I would have thought that, with any firm holding ownership of critical infrastructure (water supply, electricity, etc) we would expect the same safety net to exist FOR THE ASSET. Since the firm sitting in Chapter 11 can’t exactly say no to any offer, the government only has to offer one dollar more than the highest private bidder (which won’t be high) and they only ever buy the assets, not the failed firm. Certainly they have no need to buy any senior employees who were probably the reason the firm failed in the first place.

With assets sold, the firm goes through bankruptcy just like normal, cents in the dollar, that sort of stuff. Creditors squabble over the corpse, but the key assets are gone so no one cares.

It is only these last few days that has made a person aware of the complete fraud that has been committed internationally.

As ‘they’ say ‘at the end of the day’ there is a situation that has been created where an US Gov/t ‘bailout’ of a complete cluster—- cannot be addressed without the US Gov/t printing several more zeros at the base line of the document owed to the rest of the world. Not a problem. All on worthless paper.

Without any stretch of the imagination – they have blown it – and they are now even more massively in debt.
In concert with this; US approved financial institutions (to use that term loosely) have essentially been defrauding the rest of the world, blind.
Without something binding like bullion, productivity, or real specie the US economy is in more trouble than Flash Gordon.

it seems to me this proposal would make things worse. Every time a bank downgrades the value of the problem assets other firms have to follow suit and mark their own paper at a lower value. This is what’s been going on.

For better of worse Paulson’s plan cleans up the balance sheets of those firms that can make it allowing for fresh lending to take place.