20 September 2008

Capitol Hill beats physicists to create black hole

The more I hear about the US government plans to accumulate bad loans and "toxic" assets from financial institutions the more it sounds like an astronomical phenomena: a black hole.

Not only is this new bail-out entity supposed to suck any tainted assets within its gravitational pull, but these assets will somehow be placed into an alternate universe, permanently removed from human contact. It is not enough to just buy these assets at above market prices to prop up the financial system, but it is also critical that the underlying assets (e.g. foreclosed homes, etc) never come on the market to be sold at cut-rate prices. Doing so would drive down other asset values which would in turn make even more assets insolvent (continuing to undermine the health of the financial system).

This is NOT a Resolution Trust Corporation 2.0. The intent of RTC 1.0 was to quickly dispose of seized assets in an orderly fashion. The purpose of this bail-out is to magically transmogrify vacant real-estate into nothingness.

This sounds very much like a black hole to me. Perhaps the $700 billion going towards the bail-out will result in the creation of the biggest under ground super-collider ever seen, running from Maryland and Pennsylvania to DC and Virginia. Who would have thought our politicians would beat all the world's physicists in creating a black hole?

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