Wednesday, September 24, 2008

Revolving credit

Here's a diary at Kos that offers a number of reasons the plan should not be approved, including this gem:

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Did you catch that? There's a great little language shift. The Treasury Secretary's authority is limited to $700 billion outstanding at any time. That means he could buy $700 billion -- then sell some at a loss -- and then buy more to get back to $700 billion. This is a revolving credit line, not a firm upper limit. It's conceivable the Treasury could but and sell trillions of dollars under this authority.

We had the sense to be suspicious that "$700 billion" meant "way more than $700 billion", but I hadn't appreciated how completely open-ended it really was.


Scooter said...

Not sure I agree with that reading though I'm sure that blogger has had more time to analyze than I.

My reading of that is a cap at $700B--e.g., buy at $700B, sell some at a loss gaining say $100B back, then buying up to another $100B until the cap of $700B is hit yet again.

Stephanie said...

Mmm. OK, let's hope you've got it right.

Scooter said...

On rereading, I think the blogger and I are on the same page. I think trillions could be spent but the outlay is only $700B. If assets are sold and funds recouped, then the taxpayer outlay would be capped. I'm still not convinced it won't end up an outlay of some far greater amount.