German Understatement

From today’s Open Europe news summary:

Germany hits out at ECB plans to buy asset backed securities
ECB plans to purchase Asset Backed Securities (ABS) have taken a lot of criticism in Germany, with Bundesbank President Jens Weidmann warning that the ECB could get stuck with “low-quality loan securitizations” at inflated prices. Former ECB chief economist Jürgen Stark termed the programme “an act of desperation”. Separately, Welt reports that other members of the ECB Governing Council have raised concerns over the plan with Bank of France’s Governor Christian Noyer reportedly voting against ECB President Mario Draghi’s plans to use external firms to purchase ABS due to the ECB’s lack of experience in the market.
Of course the ECB will get stuck with low-quality loans purchased at inflated prices! Economic logic makes this a certainty. If the institutions selling such loans could get as high a price in the open market as the ECB will offer, they would sell them now. This program is nothing more than a back door bailout to politically connected, privileged, special interest groups. It is corruption on a grand scale. Of course the ECB has a good role model–the US Federal Reserve Bank. Patrick Barron
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