G7 to the Rescue!

So, the finance heads of the G7 met in DC today, and announced that they're gonna (try to) come to the rescue (main points of the plan below).

1. Take the decisive action to support financial institutions and use all available tools to support systematically important financial tools and prevent their failure.
   
2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.
   

What Would Bloomberg (and William Gross) Do?

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.