U.S. $75B Bailout Plan to Go Ahead, a Machiavellian Scheme?

Bank of America, Citigroup Inc. and JPMorgan Chase & Co. reached an agreement Friday to go ahead with their $75B bailout/backup plan to allow illiquid ABCP-related investments to trade. Unlike the Canadian plan, which seemed designed to make the participating banks a good profit, the U.S. plan is suspected to have been designed to give some value to currently "unvaluable" investments. You see, FASB 157 comes into effect this November 15th, unless some powerful lobbyists succeed in delaying its implementation. FASB 157 forces financial institutions to value these level 3 investments.

Level 3 investments are typically worthless derivatives, CDOs, SIVs, etc, leveraged out of sub-prime mortgages. They are worth nil, or close to, but cannot be truly valued because nobody wants to buy them. By creating this $75B backup plan, the banks can trade these worthless instruments between them, but assigning them any value they want, so they don't have to report huge losses. So simple... and Machiavellian at the same time.