If the federal government does take on $700 b worth of sh*tty paper from Wall St (and though the bill failed today, I do think it will pass before Oct 15), the main question will be: how much is that sh*tty paper valued at, and who will do the valuation?Paulson's asked for the Fed to do all of the valuation, subject to no one else's reviews, and he's indicated that he'll pay almost 100 cents on the dollar for them. This would amount to a ridiculous and toxic bailout. Given that these banks are leveraged up to 40 times, and that you've got CDSs sitting on top of CDOs sitting on top bad loans...it's hard to make the case that this crap is worth more than 4o cents on the dollar.
So, who does the valuation? I say Bloomberg and PIMCO. Look, PIMCO's even volunteering to do it pro bono...link here.
