Loophole in government program to buy toxic securities could cost taxpayers

Without safeguards, traders in the $40-billion program could use inside information to profit -- and any losses would be largely borne by taxpayers.

By Ralph Vartabedian

August 14, 2009

Reporting from Washington

A controversial $40-billion government program to buy toxic securities from ailing banks has a flaw that law enforcement and financial experts say could allow traders to illegally profit from inside information.

Critics of the program say that without adequate safeguards, traders could use the tens of billions of dollars provided by the government to manipulate prices and exploit the price swings in other trades.