Steve Waldman (interfluidity) is my all time favourite blogger.
We disagree on a lot - but his is the only blog I have ever back read every article on. I really like smart people I disagree with.
Today he has some (very) dark musings about the Geithner plan. His musing is that conflicts of interest could render the Geithner funds liable to massive fraud.
I remember chatting to a journalist about the Geithner plan and I suggested that one of the big problems is that almost everyone is conflicted – and conflict-of-interest with that much government participation poses a very serious fraud risk.
The solution of course is to find non-conflicted funds.
May I suggest – and I am only half joking here – Bronte Capital.
The only problem is that the criteria for eligibility specifically include only those with a conflict of interest. Here they are:
Fund Managers will be pre-qualified based upon criteria that are anticipated to include:• Demonstrated capacity to raise at least $500 million of private capital.• Demonstrated experience investing in Eligible Assets, including through performance track records.• A minimum of $10 billion (market value) of Eligible Assets currently under management.• Demonstrated operational capacity to manage the Funds in a manner consistent with Treasury’s stated Investment Objective while also protecting taxpayers.• Headquarters in the United States.
Given that we are start-up we fail the first, second, third, fourth criteria. We are Australian and we fail the fifth criteria.
Now did I once say something positive about the Geithner plan?
Actually I have too much integrity to withdraw that – but the dark musings are to be taken seriously - and indeed the criteria described above are precisely the criteria you would pick if you want conflicted people to rip off the taxpayer.