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Today, in Washington, Treasury Secretary Henry Paulson announced a strategic change in the $700 bazillion TARP program.
"Although I only recently demanded that Congress pass legislation allowing U.S. taxpayers to buy hundreds of billions of dollars worth of troubled mortgage assets," Paulson said, "I urge you to forget about my dire warnings that removing these from bank balance sheets was necessary medicine to fix our ailing credit markets."
Change of plan
The widely publicized troubled asset-purchase plan was crafted in mere days after Paulson presented it to Congress, and it was designed to allow taxpayers to purchase troubled mortgage-backed securities from companies such as Citigroup (NYSE: C ) , Bank of America (NYSE: BAC ) , and JPMorgan Chase (NYSE: JPM ) . Uncertainty regarding the value of these assets was, Paulson explained at the time, keeping banks and other financial institutions from lending to one another and thereby causing considerable economic trouble.
"Pay no attention to my assurances that I knew exactly what the problem was, and how much money it would take to fix it, and that in the end, taxpayers would make money on the deal. In fact," he continued, "forget I just mentioned it again."
Paulson acknowledged that there had been criticism of the TARP's actual strategy, which quickly became one of injecting capital directly into banks, though without demanding control in the form of board representation, or cuts in dividends, or any of the other limitations used in successful bank bailout schemes in countries such as Finland and Sweden. But he said there was good reason for handing out money with no strings attached.
"America is not Finland, and it is not Sweden," Paulson explained. "I don't see any of you eating lutefisk or swatting your sweaty bodies with a birch switch."
The assembled journalists laughed, looked at one another, and admitted that America certainly isn't Finland or Sweden. "That is silly," said Barney Field of the New York Examiner/Picayune.
The Treasury Secretary then adjusted his bow tie and produced a cane from within the briefcase he was carrying, which seemed to disappear with a flick of his wrist. Taking long, rhythmic strides across the press room, in a candy-striped Armani suit, Paulson winked at front-row reporter Laura Wedburne and explained the vital need for a new direction for the taxpayer-funded bailout fund.
Paulson said that 40% of U.S. consumer credit is provided through selling securities that are backed by monorails, band uniforms, and other such debt. He said these markets need support.
"This market, which is vital for lending and growth, has for all practical purposes ground to a halt," Paulson said. "Ogdenville has a monorail," he continued, "and so does North Haverbrook. And China just bought a thousand band uniforms under a new economic stimulus plan. They look pretty sharp."
"Also," Paulson finished, "they said you guys look like dorks."
Economists and analysts generally acknowledge that the monorail and band-uniform securities markets play an increasingly important role in global finance. "People on Main Street may not realize it," said Credit Squisse analyst Buze Aplique, "but the notional value of these securities is in the trillions, and they're vitally important to everyone. If it weren't for these," he said, "your children and elderly parents might very well be forced to eat dog food. And not the kind that makes its own gravy, either."
Aplique explained that both "plain vanilla" band-uniform and monorail-backed securities (BUM-BS) and their related default swaps (DS-BUM-BS) are responsible for the low prices you see at places like Wal-Mart (NYSE: WMT ) or Target (NYSE: TGT ) , since they allow management to hedge certain risks that would otherwise drive up commodity costs.
"Without this BUM-BS, a lot of bad things might impact consumers right in the back of the pants," he said, "where they keep their wallets. Main Street should support this."
These securities even give us minty-fresh breath, explained Aplique. Leveraged 30-to-1 and packaged together as a hybrid derivative along with weather transitional futures and sold in computer-generated, risk-assessed tranches, these "WTF-BUM-BS" allow companies like Wrigley and Colgate-Palmolive (NYSE: CL ) to make covered bets on seasonal patterns in Cool-mint producing regions like Latvia and Antarctica.
The plan will face a tough audience on Capitol Hill. Speaker of the House Nancy Pelosi (D-Calif.) was critical of the new direction of the bailout's funds. "What we have here is a continuation of the Bush Administration's failed, trickle-down economics," said Pelosi. Critics note that Pelosi did nothing to hold back the flood of cheap financing in her home state that led to the nation's highest monorail and band uniform prices, triggering a now-brutal decline, one of the worst in U.S. history.
"When President Obama gets here," Pelosi said, "the focus will be on sending money directly to families, so they can pick out their own band uniforms. Also, we'll be taxing the monorail producers to pay for the upcoming economic stimulus checks. They will be delivered early in 2009, by our new solar-biodiesel monorail."
President-elect Obama, undergoing surgery for horizon-staring-induced glaucoma, could not be reached for comment, but spokesperson Pat Patterson said, "The American people elected a president for change, and this change will bring people together, and with one another's help changing, we'll confront this critical problem in the band uniform and monorail markets, in a changeful way that is respectful to our changing allies yet brings those band uniform and monorail plants back to American shores."
"Change," he added.
Asked whether he thought the plan would help diminish the spread between LIBOR, treasuries, commercial paper, and BUM-BS markets, President Bush looked up from his lunchtime soup and told reporters, "Listen here, see. Henry Paulson is a good man. An honest man. The kinda friend you want on your side when … see, if we don't get these band uniforms, we'll look pretty silly when we play the show celebratin' the new monorail. And I just hope everyone appreciates what a job it is keeping that new monorail safe from nucular terror and the Al Queda."
Fools, in case you couldn't tell, this is satire. We can all use a laugh on days like today.