Topic: Toxic Assets

The Federal Reserve released 136 megabytes of redacted PDF documents detailing secret lending practices. The records reveal that $3.3 trillion was lent to foreign banks, including a bank partially owned by Libya. The documents also cover the Toxic Asset Relief Program (TARP) and loans to hedge funds managed by former Goldman Sachs executives.

The Wall Street Journal reports that the banking industry is lobbying the FDIC to allow banks to use taxpayer aid to buy back their own toxic assets. The hosts argue this confirms their previous analysis of the Public-Private Investment Program (PPIP) as a scam. They claim the program allows banks to clear their books while the taxpayer assumes 80% of the risk with little upside.

Secretary Timothy Geithner's plan to address toxic assets is analyzed as a massive transfer of risk to the taxpayer. The plan allows private entities to purchase assets with only 7% of their own capital, while the Federal Reserve and Treasury guarantee the remaining 93%, potentially exposing taxpayers to trillions in losses.

Secretary Geithner's new Public-Private Investment Program (PPIP) is criticized as a "scam" that uses taxpayer funds to guarantee 90-95% of private investments in bad assets. During a hearing, Michelle Bachmann was cut off by the committee chair while asking if the American people would receive a proportional share of the benefits. The hosts argue the plan effectively bankrolls private profits with public risk.

The total value of credit default swaps and toxic assets is estimated to be between 30 trillion and one quadrillion dollars, a scale that prevents Treasury Secretary Timothy Geithner from being transparent about bank solvency. The situation is compared to Japan's "lost decade," where the government failed to deal with toxic assets for 20 years.