Laughing All the Way to the Bank?

by Dollars and Sense

Here’s one of the zillion rumors flying around the news of the administration’s new $700 billion Wall Street bailout plan: once the U.S. government becomes the owner of all of these securities made up of untenable mortgages, it may privatize the collections process by turning around and selling the bad debt to so-called vulture funds. In the Spring 2007 issue of D&S, investigative journalist Greg Palast described these funds operating in an international context:

“Vulture” is not a name I made up. It’s the label used in government circles for investors who, for a small payment, take over the debts owed by one nation to another, then use political muscle, lawsuits, forgery, or bribery to push the debtor nations to cough up payments five, ten, or twenty times the amount of the vultures’ original investment.

(Of course, in the current situation it will be low-income U.S. homeowners facing “political muscle, lawsuits, forgery, or bribery.”)

Trying to track down this rumor, this morning I googled “bailout” and “vulture”—and came across this gem of a headline from Bloomberg:

PAULSON & CREW GIVE THE TERM ‘LAUGHING ALL THE WAY TO THE BANK’ A WHOLE NEW MEANING

Of course I assumed this was someone’s take on the current bailout plan. But no—the dateline was July. Turns out there is another Paulson, this one a hedge-fund manager named John (any relation?), who made a lot of money in 2007 betting that mortgage holders would face losses, and then started a new fund “to provide capital to financial firms hurt by mortgage writedowns.” Now that the U.S. government is poised to take over that role, maybe this Paulson can teach the other one how the taxpayers can make rather than lose money on the deal.

Anyway, check out the full release.

Now, back to researching that rumor about vulture funds.

Labels: bailout, Greg Palast, Henry Paulson, John Paulson, vulture funds

 

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9/22/2008 11:25:00 AM