10/29/2008 05:12 am ET Updated May 25, 2011

You Really Believe We're the Priority?

As the Bailout Bill nears completion, one of the principles being espoused is to protect the taxpayer. Pardon me if I express some healthy skepticism here by example.

Late last week, Washington Mutual, the nation's largest thrift institution collapsed. Wamu closed its doors one evening and woke up the next as JPMorgan Chase. The FDIC claimed victory, because no depositors lost money and, in fact, the insurance fund received money. JPMorgan managed to walk away with almost $200 billion in deposits (the cheapest form of money for a financial institution), and lots of "investments", such as mortgages. For this, JPMorgan paid the FDIC $1.9 billion. JPMorgan immediately wrote off $30 billion of the value of the assets they acquired (which tells you why Wamu was in trouble, and how much trouble some other banks may be in).

Now I may be making an assumption, but JPMorgan's belief in the value of the deal may have something to do with the Bailout legislation. Why? Because if the Legislation is enacted, JPMorgan may be able to simply sell the bad assets to the Government; and do so at a profit. Voila. JPMorgan ends up with the good part of Wamu for a song. The taxpayer ends up with "Toxic Waste." Seems to me like a great deal for the taxpayer.

If I am correct, and judging from years of experience watching our executive and legislative branches this is a reasonably likely, you have to believe this legislation will ensure the taxpayer is the last person in line.