Barney Style

From clusterstock.com:

You have two cows.

You paid $100 for each cow. You write that down.

Lightning strikes one of your cows, an unlikely event that should only happen once every 10,000 years.

Lightning strikes the other cow.

You notice the cows are on fire.

Your paper still says $100.

Fortunately, mark to market has been suspended so you don't have to pay attention to the fire.

Your cows are dead from fire.

Your paper still says $100.

Fortunately, mark to market has been suspended so you don't have to pay attention to the dead cows.

You notice that you aren't getting as much milk as expected, so you adjust the model and mark the cows down to $98. You are confident, however, that the dislocated stream of milk revenue will quickly revert to expectations.

You need to borrow some money so you ask investors for a loan against the cows. The investors tell you the cows are dead, and you already owe them $200 dollars you borrowed to buy them in the first place. You show them the paper that says the cows are worth $98 each.

They light your paper on fire.

You ask the government to buy the dead cows at $98 each.

Tim Geithner tells you about the public-private investment partnership, which will encourage BlackRock and Pimco to buy the dead cows. Pimco puts in $10 and the Treasury puts in $10, and the FDIC lends $120 to a new entity called Pimcows, LLC. They buy the dead cows for $70 each. Tim whispers that he expects you'll buy two new cows with the $140.

You have $140 in cash and $200 in debt to your original investors. You have no plans to buy new cows.