donsutherland1

This evening, CNBC reported:

Among other early details on the fund, according to a Treasury official who spoke with CNBC:

• Hedge funds will not have access to the bad-debt fund that the Treasury Department plans to propose to Congress.

• The fund will also be accessible only by U.S.-based institutions, the official said.

In my opinion, the provision that limits the fund to U.S.-based institutions, only, risks giving foreign investors a disincentive for purchasing U.S. securities. In the long-run, especially as the U.S. relies on foreign sources of capital for some of its public and private financing needs, this move could be short-sighted.

MC.no.spin

Aren't these foreign investors buying these securities through U.S. based instittutions and so are covered under this umbrella?

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The heart of human intelligence is pattern recognition ~ Ray Kurzweill

Onion Eater

Within a day they changed that. This whole situation is moving very quickly - its urgency, if nothing else, seems to be uppermost in Paulson's mind - which is why I'm withholding comment until things settle down a bit.

However, I will say that I think the restrictions on short-selling are a bad idea. They are not unlike Nixon's price controls in the face of stagflation except, instead of trying to hold the prices of consumer goods down, these controls are trying to hold the prices of financial stocks up. But all price controls are similarly doomed, whether they put floors or ceilings on the market. The disconnect between quoted prices and actual valuations could result in a catastrophic fall in prices when the restrictions are lifted.

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