BRYAN CAPLAN
May 7, 2013
Keynesian Bets: What's Out There
May 6, 2013
Keynesian Bets Bleg
May 6, 2013
The Pyramid of Macroeconomic Insight and Virtue
May 2, 2013
A Natalist Provision
May 1, 2013
I Was a Teenage Misanthrope
DAVID HENDERSON
May 5, 2013
John Thacker on Vaccinations and the Sequester
May 3, 2013
Chef Rudy's Virtues Project
May 2, 2013
My take on Reinhart and Rogoff
May 1, 2013
Medicare Kills a Program
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Barry Ritholtz has offered a million dollar bet that the bailout will lose money, so bigger guns than you are lined up on your side.
Betting on a deal like this to make money seems an awful lot like betting on Wile E. Coyote to get the Road Runner.
First, we need to factor in what the $700bn costs, as that isn't free money. Even if the appetite for USG debt is bottomless right now, isn't there a crowding-out issue there?
Second, 50% impairment means how many million foreclosures that will eventually need to happen? I have to wonder what the politics will look like when every single mother with a disabled child and old retired couple are getting foreclosed on not just by a top-hatted banker, but their own government. Could we actually be better off in this case with an Obama administration that might be inoculated against the first 6 months of bad press that this would bring?
The only good scenario I see for this is that the market is just in a total, dress-over-head panic right now, and the gov't will be able to dump these back into private hands within a couple years, which won't be enough time for the really weird problems to get started in earnest.
Are PE firms or any of the other institutional players anywhere to be seen in this? There are a lot of recent-vintage VC funds out there in the billion-plus range that have a 4-7 year timeframe, and I'd imagine they'd start jumping in if the opportunity to double, triple, or more in that timeframe was becoming clear-cut. My cynical take is that the holders of all this debt are expecting the government to clear them out long before they get to the fair market value that would bring in the private institutional money en masse.
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I'm no Barry Ritholtz and I'm still happy to put up six figures -- the equity in my home, which had a 25% down payment -- against Andy Kessler...or, rather, against the bailout...or, rather, against the competence of the State.