Rolling US Economy Into The Shitbin Thread

Or our nation's strange, troubled future.

wow nobody but nobody likes this plan.

No. Bankers should love it. They get to unload their toxic assets at something between book and market value, keep their management structures, and live to bank another day. The investors should also love it, for reasons set forth above. And -- if the Obama Admin. is right, and the toxic assets will, sometime soon, show a net profit over the price they command at auction now -- everyone should love it. But that last possibility seems very unlikely.

toxic assets will show a net profit over the price they command at auction now... seems very unlikely

I agree, with one reservation. If the value of the dollar is sufficiently undermined by rapid inflation, or hyperinflation, then the asset prices in inflated dollars could be nominally higher, although far less in constant dollars.

Ahhh, I need to figure out this whole "inflation, hyperinflation, deflation, the dollar's relative value" business.

Krugman explains his objection to Obama's bank plan.

Krugman makes perfect sense to me there, though I admittedly have a hard time following some of the fine points of the crisis. But I do know that at the bottom of a very complicated mess of investment products is a very simple fact of housing prices that are still too high in many places. They only reached that level because of inflated credit and unrealistic expectations, and now there's a glut, and prices are out of whack with incomes, especially as they are now decreasing as unemployment rises. No matter how complex the products, if these homes and the mortgages on them are at the bottom of it all, no plan that relies on propping up the prices of homes or related assets can work.

at the bottom of a very complicated mess of investment products is a very simple fact of housing prices that are still too high in many places

That's a big part of it. But those CDOs are a big part of the problem, too, and they contain a hodgepodge of assets (of which home mortgages are one). To me, that means the problem is also largely consumer debt. And on that, see the very scary "Twin Peaks" theory, drawing a parallel between the ration of household debt to GDP in 2007 and 1929. All of this raises another problem. Obama keeps saying the problem is the freezing of the credit market, but unfreezing those markets might only spark a new wave of the kind of unsustainable consumer spending that got us to this point. In other words, the solution to one problem (banking/credit market) might exacerbate the other problem (consumer debt), and that's a bad place to be.

Right. The the "solution" cannot be an attempt to get us back to where we were before.

xpost

Here's the simplified way I like to think about the deflation, inflation, hyperinflation question.

This whole collapse revolves around bad debt. Not just bad debt, but hopelessly toxic debt, debt that will never be repaid under any sane economic conditions, because the collateral for this debt was so laughably inadequate, or so tangibly non-existant, that only a bleeding fool would have loaned the money and only a worse fool would attempt to repay it.

During the bubble, these damn-fool assets were accepted as real. Consequently, they brought into existance a very large bubble of money. Real money, because it was treated as and accepted as real money. Much of that money has now disappeared, because no one is accepting these assets as anything but a reeking pile of horseshit. For good reasons I might add.

Now, what the Federal Reserve and the Treasury and the Congress are trying to do boils down to this: they are trying to create economic conditions that would allow all these bad debts to be repaid, or substantially repaid, by the debtors. In doing so, they hope create conditions where these toxic debts become only mildly toxic, so the economy can digest them with only mildly toxic effects, a stomach ache instead of convulsions.

They wish.

In essence, all the efforts of the Federal Reserve and the US government up until now have been trying to reverse a situation where sanity has replaced insanity, so that we can get back to a comfortable level of insanity again. The only way to repay these debts is to create a bubble of money of a similar size to the bubble that disappeared lately. Except there is one difference: now the markets know the real economy has no assets to back up this new bubble of money. To the markets this will look like funny money.

The way to replace the bubble of vanished money is through government borrowing and the Federal Reserve buying up assets. They are doing both of these. So far so good. The question then becomes, how much of this funny money do you replace?

Generally speaking, allowing the old bubble of money to vanish completely would result in deflation. Replacing the entire bubble of money with equally fictitious money will result in hyperinflation. Replacing some smaller amount of the vanished money, say 35% of it, will result in inflation with very high unemployment. If you were forced to choose, this last alternative is probably the best of some sorry-ass choices.

The political part of this equation is also pretty simple.

As the government borrows and spends more money, what does it spend it on? Bonuses for AIG employees? Paying off bad gambling debts? Assistance for the victims of the bad economy? Roads and bridges? Congress will decide these things, in negotiation with the Obama administration. Lucky us.

If you have been paying attention, one of the hallmarks of the government and Federal Reserve policy has been to hand money directly to banks and institutions like AIG, with few strings. OTOH, what they want to do for ordinary people is "make more credit available" to us, so we can go further into debt to the banks and car companies. Lucky us.

The last thing to know is that the Federal Reserve is not subject to politics in the ordinary way, but only through the Congress changing its charter, which this Congress would not do, not ever. And they can print as much new money as they like. And Ben Bernancke is on record as being willing to do almost anything to avert a deflationary cycle, including dropping money from helicopters. Who do you think he wil drop the money on? Morgan Bank, or you and me?

wow, that's an interesting post. what do you think we should do instead?

It won't happen, because the voters of the USA will not be able to sort out who is handing them the straight dope, and who is selling them snake oil, and too many of the representatives they have in Congress are merely mouthpieces for the interests of big business -- and financial institutions are very, very big business.

But since you ask, the essence of the matter is deciding who loses. No one wins.

First, I would treat the failed banks as failed banks. So, the shareholders would be the first losers. Their shares will go to zero. I would close the failed banks and try to segregate their assets into three piles: good, bad, and wtf-do-we-have-here?

The bad assest will be trashcanned.

The good assets would belong to a new, smaller, reorganized bank under new management and the bank would reopen for business. Bondholders of the bank would be offered a return that is commensurate with the bank's new balance sheet, which would be pennies on the dollar.

The wtf assets would need to be segregated into a national "bad" bank, awaiting some idea of wtf they might be worth.

Next, the federal government should be concentrating on assisting the victims of the bad economy and rebuilding infrastructure. Not propping up zombie banks. Food stamps should be expanded. Ditto for unemployment benefits, education, and medicaid. If the feds are going to have to add to the debt, the money should go into the real economy, and to people and jobs, not banks and financial paper.

There should be a new government entity to deal with all the houses that are in foreclosure, or approaching foreclosure. It would need broad powers, a clear mandate, and the imperative to disappear in 5 or 6 years.

The Fed is still going to have to print money and buy assets with it. It should concentrate on supporting the Federal budget and buying Treasury bonds, and this support should be limited, so the US Treasury must maintain itself worthy of credit from the marketplace, not just the Fed.

Of course, there need to be much stricter oversight of banking and insurance than we've seen lately. Even if it is an over-reaction. We've pissed away so much trust in our banking system we need to rebuild it the hard way, by making it obviously, transparently worthy of trust.

That would be a good approach, imo. And it would entail a lot of pain. A lot. That comes with any one of the choices on the table, so you may as well choose the pain that leads to the best result in the end, rather than pointless, fruitless pain that leaves you in worse straits than before.

Now I should get off this thread for a while. Too agitating. I need a nice long walk in the woods. Nature is so much saner than people are.

Hey, Aimless, thanks; this is very interesting. And, unsurprisingly, it raises more questions:

Generally speaking, allowing the old bubble of money to vanish completely would result in deflation. Replacing the entire bubble of money with equally fictitious money will result in hyperinflation. Replacing some smaller amount of the vanished money, say 35% of it, will result in inflation with very high unemployment. If you were forced to choose, this last alternative is probably the best of some sorry-ass choices.

Why do these various options result in, respectively, deflation, hyperinflation and inflation + unemployment? I mean, for instance, if there is much less money around (option one), why does that depress prices (and why does it do so in a dangerous way)?

The wtf assets would need to be segregated into a national "bad" bank, awaiting some idea of wtf they might be worth.

What does the nationalized bank get in return for this "WTF asset," if anything?

Not propping up zombie banks. Food stamps should be expanded. Ditto for unemployment benefits, education, and medicaid. If the feds are going to have to add to the debt, the money should go into the real economy, and to people and jobs, not banks and financial paper.

So you don't buy the "too-big-to-fail" notion? At least with respect to some of, say, AIG's counterparties?

I think we're on the same page with respect to bank policy. I think we'll need to nationalize some banks after these "stress tests," to clean up the balance-sheets. There's no way to prop up the asset-side of the sheet by betting long on these bad mortgages.

What's amazing to me is that we're facing so many crises at the same time -- (a) the regular recession, (b) the banking crisis, (c) the AIG crisis, and more -- all of which are feeding on each other. Bad news.

I'm wondering if the counterparty issue isn't the elephant in the room here -- make them take a bath and the US has a major international relations and larger creditworthiness problem on its hand perhaps? And yet explaining this only draws attention to the flow of money out of the country?

Simon Johnson (formally of the IMF; now writes for the Baseline Scenario blog) had an interesting idea: Allow AIG to fail and, on the day the failure is announced, have the gov't bail out only those counterparties that are truly "too-big-to-fail." The idea is that, at the moment, we're bailing out all of AIG's counterparites, including smaller players whose failure won't shatter the economy, and that means we're overpaying. This is a more targeted approach. It makes sense, but I don't understand the logistics. If AIG isn't announcing who all it's counterparties are, how can we do this in one fast move? I don't know, but I'm pretty sure Johnson does, and he seems confident it can be done.

So you don't buy the "too-big-to-fail" notion? At least with respect to some of, say, AIG's counterparties?

Big shouldn't mean stupid. No one would dream of claiming to be too stupid to fail. If that is so, then no one should be too big to fail either, if their actions were plain stupid.

I don't recall AIG advertising its swaps were backed by "the full faith and credit of the U.S. government". As a matter of fact, the market in credit default swaps was specifically denoted as an "unregulated market", which, if it means anything should mean - let the buyer beware.

In which case, AIG's counterparties must swallow any losses they incurred through negligence or failure to perform due diligence. I mean, when AIG began writing "naked" credit default swaps, it should have been perfactly evident that they were running a bookie parlor. Running it pretty damn poorly, too. Any Las Vegas casino worth its salt knows how to protect itself against paying out more than it takes in.

It really gets me when apologists for the hedge funds, AIG, investment banks and wall street firms complain that the government wants to act "punitively" for wanting to limit salaries and bonuses, when, if the free market had been allowed to run its course, the punishment for most of these institutions would have been corporate death, with the loss of all income, every job, and the liquidation of every asset down the last light fixture.

These assholes really do not get it. They failed. They failed spectacularly. They failed in all the most important aspects of their jobs. They don't deserve shit. They don't deserve to keep their jobs. They should apologize meekly and go live in their car.

mean, when AIG began writing "naked" credit default swaps, it should have been perfactly evident that they were running a bookie parlor. Running it pretty damn poorly, too. Any Las Vegas casino worth its salt knows how to protect itself against paying out more than it takes in.

OTM. I was shocked when I began reading about "naked" CDSs.

Re: Bonuses. I agree with you. The argument that's being spun now is that compensation limits will keep private businesses from joining Treasury's new "public-private partnerships." That doesn't make sense to me. It might if we were intentionally trying to limit compensation at any institution that receives gov't funds of any sort, but as of now, we're focusing on curbing excess compensation and bonuses at megafirms that spectacularly failed and now need bailouts to survive. The "already-failed (because of excessive greed/recklessness) megafirm" case is distinguishable from the "we're a private firm willing to take a chance on buying toxic assets from distressed banks" case.

The bad assest will be trashcanned.

I'm not sure what this means. Let's take the simplest form of a toxic asset: A million-dollar home sold to an unemployed meth addict that's now worth only 250k. So, it's a bad (or "toxic") asset. What happens when the government "trashcans" it?

The rage of Glenn Greenwald:
http://www.salon.com/opinion/greenwald/2009/03/21/anger/index.html

In sum: financial elites own the Government and both political parties. Their money drowns Washington and their lobbyists control it. They used that ownership of Government to abolish decades-old legal and regulatory protections which previously constrained what they could do. In the lawless environment which they literally purchased from our political leaders, they were able to pillage and pilfer and steal without limit.

I love how this "purchasing" of government is done by the buyer, as if the seller has no responsibility. Our representatives--the United States of US--are complicit in the downfall, it is the people we have elected to represent us who have sold us down the river to a bunch of animals.

Why has there been so little public rage Glenn? Because at the end of the day it is OUR complicity in the system that keeps allowing scandal to perpetuate. It is our guilt for not demanding more from our government. We let our president go on the Tonight Show while we picket Goldman's office. We can rage all we want at the investment banks but in the end we are the enablers.

I agree completely, Don. And I want to add: we are enablers because we like the results it's gotten us: a ridiculously high standard of living for so much of the populace (including nearly every American, if not every American, who posts on ILX). So why ask questions when you're getting paid?

How much would our standard of living drop if we ended these financial shenanigans? I don't mean for the rich-by-US-standards, I don't give a fuck if they bump down to an average standard of living. But what would the average standard of living in the US look like if we cut down the US economy's dependence on financial services?

We let our president go on the Tonight Show while we picket Goldman's office. We can rage all we want at the investment banks but in the end we are the enablers.

wait, who cares if the president goes on the tonight show? what's that got to do with anything? i thought he gave a fairly lucid (if necessarily simplified) summary of the whole aig situation there, and probably reached some people who wouldn't watch your normal 8 p.m. address-to-the-nation.

i agree about the society as a whole acting as enablers -- we've all been in on it, to one degree or another -- but greenwald's obviously right that wall street has pushed again and again for more latitude, less oversight, more access to americans' cash (don't forget their push for a piece of the social security action), all with just the vaguest of assurances that they knew what they were doing. and washington let them essentially keep raising their bet limits, without making sure they could cover their losses (since gambling analogies seem to be the order of the day). the complicity is widespread, but some people are more complicit than others.

tipsy, you're right that some people are more complicit than others inasmuch as they were active plutocrats, while others merely looked away while these active plutocrats acted. But if we are to take this as a lesson for democracy in the 21st century, we should pay a lot of attention to the latter.

our president trivializes the office when he goes on the Tonight Show. The Tonight Show is trivial. Sorry, I just think it debases the whole conversation about AIG when we start expecting our elected officials to dumb down the marketing effort. What's next, an appearance on American Idol? Way more viewers there. Or maybe Jeopardy. Hell, he might as well go on SNL too so that way joking about the Special Olympics will go over better.

But to Greenwald's point, Wall Street owns D.C. because our elected officials have been rolled and sold. The billions of dollars in lobbying was readily accepted in D.C., the favors were bought and the laws were written accordingly. Protesting Wall Street is like protesting criminals when the last line of defense is a corrupt police force.

The simplest form of toxic asset is not in the form of a 250K home that sold for a million. It is an asset, plain and simlpe. The truly toxic assets are in the form of bonds that are backed by a hodgepodge of loans, junk bonds and credit card debt, were rated AAA and now are producing 2% of the anticipated return, if that.

No matter how you slice this, there is no asset behind the bond that one can come at in less than five degrees of seperation and fighting through a phalanx of lawyers. And what you can seize after all that trouble will not be worth the trouble or expense.

I grant you that if some of these bonds are still returning 2% of face value they are worth segregating into the "bad" bank, but many of these assets will prove to be entirely worthless. Zero return. Pure trash.

Aimless OTM.

our president trivializes the office when he goes on the Tonight Show. The Tonight Show is trivial. Sorry, I just think it debases the whole conversation about AIG when we start expecting our elected officials to dumb down the marketing effort.

"trivializes the office"? i guess i don't have these kinds of concerns. maybe if he starts doing it every week, or shows up on hollywood squares or something, but as an occasional way do outreach and p.r. and whatever, it seems sensible. (and i'm not really sure the tonight show is any more trivial than meet the press or whatever.)

as for dumbing it down, if you could get yr average american to grasp even a dumbed-down version of what happened with aig, mortgage-backed securities, and the whole big clusterfuck, we'd be a good step ahead of where we are, knowledge-wise.

I suppose that what surprises me the most about AIG is not the intelligence community connections and the inside line to the Republican establishment (I had no clue that the founder of AIG was Ken Starr's uncle), but that AIG had all these inside connections for years and still managed to fuck up.

culture of nepotism in wall street/washington is disgusting (elite private prep school=>elite ivy/stanford/berkeley=>$120,000 investment banking jobs straight out of undergrad), reason #1 we're in a foundering plutocracy rather than a healthy democracy

culture of nepotism in wall street/washington is disgusting (elite private prep school=>elite ivy/stanford/berkeley=>$120,000 investment banking jobs straight out of undergrad), reason #1 we're in a foundering plutocracy rather than a healthy democracy

you realize that what you've described as "plutocracy" is gabbneb's version of utopia, right?!?

also, i find it hard to take seriously arguments that president obama is trivializing the office of the presidency by appearing on the Tonight Show after eight years of an administration that raised trivializing the presidency to an art form.

i know, when he was on there (at least until the special olympics joke), i was thinking it was nice to have a president who can go on tv in an ad hoc setting and not seem a.) totally canned and scripted, and b.) like a dunce. he can talk like a more or less normal person, and seem smart while doing it. i'd go on the tonight show too if i was him.

The simplest form of toxic asset is not in the form of a 250K home that sold for a million. It is an asset, plain and simlpe. The truly toxic assets are in the form of bonds that are backed by a hodgepodge of loans, junk bonds and credit card debt, were rated AAA and now are producing 2% of the anticipated return, if that.

No matter how you slice this, there is no asset behind the bond that one can come at in less than five degrees of seperation and fighting through a phalanx of lawyers. And what you can seize after all that trouble will not be worth the trouble or expense.

I grant you that if some of these bonds are still returning 2% of face value they are worth segregating into the "bad" bank, but many of these assets will prove to be entirely worthless. Zero return. Pure trash.

So the toxic asset you're referring to is more akin to that "top 10% tranche" of a CDO that was, at one time, considered safe enough to warrant a AAA-rating? I'm asking (a) to confirm my understanding and (b) because I'm especially interested in this aspect of CDOs. It seems to me that -- assuming the below-quoted passage from Taibbi's article is correct -- there is a massive fraud claim against the banks selling these CDO:

The problem was, none of this was based on reality. "The banks knew they were selling crap," says a London-based trader from one of the bailed-out companies. To get AAA ratings, the CDOs relied not on their actual underlying assets but on crazy mathematical formulas that the banks cooked up to make the investments look safer than they really were. "They had some back room somewhere where a bunch of Indian guys who'd been doing nothing but math for God knows how many years would come up with some kind of model saying that this or that combination of debtors would only default once every 10,000 years," says one young trader who sold CDOs for a major investment bank. "It was nuts."

Who would have standing to pursue such claims is a separate question.

This leaves the question of how "toxic assets" -- of whatever type -- are handled in a nationalization scenario. So the government swoops in, takes over the bank, (n.1) I assume infuses it with capital (as an inducement to permit the takeover), divides up its assets and leaves only the good ones, and as quickly as possible thereafter, shops the leaner-and-meaner institution to private purchasers looking to acquire a bank. The bank gets nothing for the toxic assets (of either the "bad" or "WTF" variety). Those toxic assets are then put into a government bank. The debtors whose accounts were bundled into the toxic asset are still responsible to make their monthly payments, I assume. If those debtors default, I guess now it's the government that can foreclose on the security agreement if it chooses to do so. The government can, I assume, also renegotiate the terms of the loan, thereby helping the debtor stay afloat. Is that basically what happens? (I realize this is horribly oversimplified).

____________________________________
(n.1) Another issue here is what happens if the bank disputes the results of a gov't analysis finding it insolvent. That is, can the bank say "NO" to the government's efforts to nationalize it, and if it does so, is the bank then vulnerable to efforts by its creditors to force it into bankruptcy? (I assume a forced bankruptcy is the only recourse left at that point, unless the bank -- down the line -- admits its insolvency and voluntarily seeks protection under the bankruptcy code (or whatever analogous set of laws applies to a bank)).

That's the first time I've ever seen a footnoted ilx post. Kudos.

can the bank say "NO" to the government's efforts to nationalize it, and if it does so, is the bank then vulnerable to efforts by its creditors to force it into bankruptcy?

i don't know the answers to a lot of your (good) questions, but this one pretty much answers itself. no company would face nationalization if it weren't facing bankruptcy. when people talk about "nationalization," they're really talking about a form of bankruptcy -- but a more structured one than the "let the cards fall where they may" approach to lehman brothers. in retrospect, the problem with lehman wasn't just that it went under, but that it went under with no serious attempt to mitigate the effects of its collapse. instead of learning from that that collapses would have to be handled differently, paulson and bernanke freaked out and said 'NO MORE COLLAPSES!' which led us directly to our current limbo, where these things aren't being allowed to fail, but also remain outside the direct control of the government.

plus consider the operating differences/assets between an i-bank like Lehman and, say, General Motors. Lehman collapsing is more of a vaporization/vacuuming effect for creditors compared to industrial type bankruptcies.

That's the first time I've ever seen a footnoted ilx post. Kudos.

lol. Thx.

I just listened to this interesting interview on TPM. It reinforces a lot of what's in Taibbi's article, and there are whispers in it of the underlying economic class-issues that lay just below the surface of this debate. OTOH, there's this analysis from TPM's Josh Marshall, which basically suggests that it's understandable cautious thinking that has the Obama Admin. trapped in the TARP/buy the toxic assets mindframe.

Not to say Marshall agrees with the TARP-type approach. From what I can tell, he doesn't. He just says that the outside chance of a global economic collapse is what's keeping the Obama Admin. from taking the boldest type of action with regard to the banks (e.g., nationalization).

And, on a more optimistic note, Matthew Yglesias makes a case for the new public/private partnership plan, and seems bullish on the Admin.'s new financial regulations, implying they may be laying the groundwork for putting large, dead financial firms into receivership.

(Sorry for multiple, multiple posts).

I really don't see much use for Marshall's post--risk aversion/mitigating risk is a cornerstone of anyone dealing in finance.

As for Ylgesias--he's kind of stating the obvious :"By contrast, if enough people buy up mortgage-backed securities to get the banks back in business, then sound elements of the real economy can expand and the economy can recover." There's the rub Matt--who are "enough people" in this scenario and how much taxpayer assistance do we give them to buy shitty securities?

I really don't see either JM or MY having very good insight on economic matters.

i've found josh marshall helpful exactly because he admits a lot of this stuff is over his head. he's been hashing it out in public, trying to get a bead on it, and it's made for some good layman's reading. (he boiled down the basics of the whole counterparty-payment issue with aig before i saw anyone in the bigger media outfits really get a handle on it.)

and i think he's right that caution rather than cronyism is behind most of what geithner and obama have done (or not done) so far, although under the circumstances they can look awfully similar. but as various people have started to say, it seems like we're far enough beyond september now that we should be able to talk seriously about letting some things "fail" (in a careful way) without everything going to hell. but that doesn't seem to be the plan, which is maybe a problem.

Baseline Scenario, the best online destination-point I've found for information/analysis on the economic crisis, just posted an analysis of Treasury's new program. One thing that puzzles me, in No. 1 and 2, is what appears to me to be a double payment/guarantee by the gov't. For instance, in No. 1, the gov't (a) pays up to 80% to buy a bank's troubled loans and then (b) it provides non-recourse loans for up to 85% of the total funding/guarantees against falling asset values. Anyone know if I'm reading this right, e.g., that there are two payments/guarantees being made by the gov't in point-one of Treasury's new program? And, if so, what's the difference between them? It seems to me that the initial money being committed is cash to buy the actual troubled loan, and the second money being committed is a guarantee against the purchased asset falling in value (or maybe not rising sufficiently in value).

BTW, Baseline Scenario also has a good new post discussing some nationalization issues.

Guys ive been out of town for two days and at the airport CNN was all "OMG AIG is suing the government". Did anything come of that, or was that Wolf Blitzer yelling for no real reason?

OMG DeLong is a heretic!!!!!!!!!!!!!!
http://delong.typepad.com/sdj/2009/03/i-think-paul-krugman-is-wrong.html

delong's point #2 there is what i used to think the obama strategy was -- wear down resistance to the idea of nationalization by exhausting other avenues first. but i'm not sure of that anymore. but hell i'm not sure of anything.

or, take office 30 years into voodoo economics plutocratic nightmare, gradually (takes longer than two months) tilt county back to normalcy over four year term

tim speaks
http://online.wsj.com/article/SB123776536222709061.html

http://www.nytimes.com/2009/03/23/business/economy/23toxic.html?hp

As part of the program, the government plans to offer subsidies, in the form of low-interest loans, to coax private funds to form partnerships with the government to buy troubled assets from banks.

But some executives at private equity firms and hedge funds, who were briefed on the plan Sunday afternoon, are anxious about the recent uproar over millions of dollars in bonus payments made to executives of the American International Group.

Some of them have told administration officials that they would participate only if the government guaranteed that it would not set compensation limits on the firms, according to people briefed on the conversations. The executives also expressed worries about whether disclosure and governance rules could be added retroactively to the program by Congress, these people said.

The horror!

But - I don't understand how those those last two grafs connect with the first one. Compensation limits, disclosure, governance rules, etc are potential conditions of taxpayers owning a preponderance of shares in a company, i.e. owning it.

Government subsidies with which private funds can buy up troubled mortgages have nothing to do with that.