If the opportunity to make money on these depressed assets is so great, then why don’t cash rich players with long investment horizons, like sovereign wealth funds, university endowment funds, and the Buffetts of the world, swoop down and buy these up? Is Federal Government better at assessing these assets than the professionals?
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Watch and see what happens next week. If the government establishes a bid, say at 30 cents on the dollar, there very well may be other players jumping in to buy at a higher price. It is not happening now because of the sheer panic in the market.
The reason the Secretary of the Treasury wants authority to purchase securities without the review of any agency or court of law is because many of these securities are practically worthless. Financial institutions have either acquired or originated various structured finance products for which there is no underlying collateral.