Treasury officials engineered auction outcomes to avoid exposing banks as insolvent

Evidence

The plan purported to allow for the Treasury to manipulate its demand for securities, thereby manipulating the price paid, while preserving the ability to claim that the prices paid were still “market” prices, at least in some sense … A concern of many at the Treasury was that the reverse auctions would indicate prices for MBSs so low as to appear to make other companies appear to be insolvent if their balance sheets were revalued to the auction results. This could easily be handled within the reverse auction framework, however … we could experiment with the share of each security to bid on; the more we purchased, the higher, presumably, would be the price that resulted. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 852

Categorization

• XREF: Echoes the ‘sacrifice’ article’s theme of institutional theater masking material reality — here the ‘market mechanism’ as legitimation ritual. — connects to: Treasury abandoned market-designed asset auctions for direct capital injections — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 860; Treasury prioritized political efficacy over economic efficiency in TARP design. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 861

Broader Connections

• Treasury prioritized political efficacy over economic efficiency in TARP design. #corroborates (0.88) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 861
• Treasury abandoned market-designed asset auctions for direct capital injections #expands (0.85) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 860