Posted on 03/23/2009 4:43:20 AM PDT by FBD
Geithner to formally unveil details of next step in rescuing banks: Public-private partnerships.
WASHINGTON (CNNMoney.com) -- The Obama administration on Monday will formally unveil a program to help banks clean up their books by subsidizing private investors' purchase of troubled assets.
The effort marks the next big step in Washington's six-month-old bank rescue, which has so far mostly entailed making capital investments and backstopping bank debt.
Administration officials, in a briefing with reporters late Sunday night, said they plan to commit $75 billion to $100 billion to start wiping out bad assets and would evaluate how programs are working before deciding how to commit more money.
The goal is to buy up at least $500 billion of bad assets -- loans, such as those for subprime mortgages, that are now in danger of default.
Investors have been waiting expectantly for details since last month when Treasury Secretary Tim Geithner announced the framework of a plan to address two of the biggest problems in the banking sector: the toxic assets keeping banks from lending and the shortage of capital at major institutions.
Under the new Public Private Investment Program, taxpayer funds will be used to seed partnerships with private firms to buy up assets backed by mortgages and other loans.
The effort will involve the Federal Deposit Insurance Corp., Treasury Department and the Federal Reserve, senior Treasury officials said late Sunday night.
(Excerpt) Read more at money.cnn.com ...
-Talk about NEW-SPEAK... PUBLIC and PRIVATE are polar opposites in capitalism, and this sure looks like fascism to me.
This is straight out of George Orwell's '1984' novel. A person couldn't make this stuff up.
PING:
What say you, Meek?
“Under the new Public Private Investment Program...”
What's the difference between this and buying up scratched losing lottery tickets?
Remove bad assets from banks to sell to other banks with the new owners profiting from any upside and the taxpayers on the hook for downside. This is socializing risk!
The purpose? To continue the interest payment on an even bigger loan, which makes the banks richer and makes the Federal Reserve richer and more powerful.
The Feds collude with the politicians at the national level to accomplish these hostile takeovers because it makes the politicians more powerful (think of Bawney Fwank saying, “WE own these companies so maybe we think about who should be able to keep their jobs” and thus it makes the Federal Reserve the default “board” of not only these companies but of the industries they comprise, as it creates a total monopoly over these businesses and enables the politicians and Federal Reserve to operate as a monopoly, effecting policies that control the competitors of the companies they buy out.
“But I thought the liberals and leftists were against monopolies (like MicroSoft).” That was just another lie intended to deceive while they set up monopolies to their liking.
doesn’t sound like a good deal...
I assume the purpose is to limit profits (i.e., no vulture funds allowed).
Wasn’t it the “fed” who engineered the AIG bailout, among others?
I think Ghost of Philip Marlowe has the answer in #5
I thought “buying toxic assests” was the original plan for the TARP money that Poulsen realized was a bad investment so changed directions?
Will somebody please create an index fund providing a mechanism to “short sell” these “assets”?
There is value if they can break it up into identifiable pieces or even just a location. If you knew you were buying paper from Ft. Meyers, Fl you wouldn't pay anymore than 35 cents on the dollar. If you can't identify what your buying, it is a pure gamble...
ML/NJ
Uhhhh, wasn’t this the point of the “first” failout (sorry- “bailout”) back in September - buy toxic “ass ets”???????
WASHINGTON (Dow Jones)—Noting that the U.S. financial system “is still working against economic recovery,” the U.S. Treasury Department Monday revealed details of its plan to address toxic assets weighing on banks’ balance sheets.
Treasury said one major reason the financial system is still facing challenges is because of “legacy assets” and securities that are compromising banks ability to raise capital and their willingness to boost lending.
Under the new Treasury program - the Public-Private Investment Program - the Treasury Department, Federal Reserve, the Federal Deposit Insurance Corp. plan to work with private investors to try to restart a market for these troubled assets.
The federal government will use up to $100 billion in funds from the Troubled Asset Relief Program, or TARP, and capital from private investors in order to generate $500 billion in purchasing power to buy legacy assets, Treasury said in documents provided early Monday. The department noted that the program could potentially expand to $1 trillion over time.
The program has two parts. It will address both the legacy loans and the legacy securities clogging the balance sheets of financial firms.
Under the legacy loan program, banks will identify the assets they wish to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio. Eligible assets will be determined by banks, regulators, the FDIC and the Treasury Department.
“A broad array of investors are expected to participate in the Legacy Loans Program,” Treasury said in a fact sheet it provided Monday. “The participation of individual investors, pension plans, insurance companies and other long-term investors is particularly encouraged.”
Under the legacy securities program, non-recourse loans will be made available to investors to fund purchases of legacy securitization assets. Eligible assets are expected to include certain non-agency residential mortgage-backed securities that were originally rated AAA and outstanding commercial mortgage-backed securities and asset-backed securities that are rated AAA.
Well, that’s what they told us, but that’s not what they did. They just gave the money to the banks with no strings attached. They also forced the money on banks that id not want it. Atleast, that was my understanding.
http://zerohedge.blogspot.com/2009/03/will-somebody-remove-geithner-from.html
the zerohedge.com link which explains this scheme....not in a flattering way
You might be able to recycle the scratched losing lottery tickets and make something useful out of them.
35 cents on the dollar is great compared to these assets not being tradable at all due to their murkiness
35 cents on the dollar type assets are very tradable
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