Treasury Presses Ahead With Plan For Toxic Assets

[steven johnson]

Source: Washington Post

The Treasury Department will unveil the next step in its financial rescue efforts tomorrow, announcing that it intends to create a government body, called the Public Investment Corp., to finance the purchase of as much as $1 trillion in soured loans and toxic assets from ailing banks, according to sources.

The plan calls for the new entity to combine its resources with the Federal Deposit Insurance Corp., the Federal Reserve and private investors to buy those loans and other assets. But the government will put far more money into the deals and take on more risk than the investors, which could include hedge funds, private-equity firms, pension funds and foreign investors with U.S. headquarters, the sources said. The corporation will be funded with $75 billion to $100 billion from the $700 billion financial rescue package.

The government's effort to deal with toxic assets and loans harkens back to the original intent of the Troubled Assets Relief Program, or TARP, that Congress approved in October.

After the measure was signed into law, Bush administration officials moved away from directly purchasing the assets partly because they thought it would take too long to develop the right program and because they thought they needed to use the bulk of the rescue funds simply to keep banks alive. Those officials were widely criticized by lawmakers and investors for changing course so suddenly and creating uncertainty about the government's intentions.




Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/21/AR2009032102246.html

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This sounds like a repeat of the TARP fiasco. The Wall Street Journal account of the plan was not reassuring.

http://online.wsj.com/article/SB123758981404500225.html?mod=mktw

If The Wall Street Journal’s description of the Treasury’s plan to get toxic assets off of bank balance sheets is correct, it may be the most complex set of programs in the history of the federal government. According to the paper, "the framework, designed to expand existing programs and create new ones, relies heavily on participation from private-sector investors." The question which will remain unanswered for some time is whether hedge funds and other pools of private money will risk being partners with the US government in programs designed to help the banks improve balance sheets.

http://247wallst.com/2009/03/21/treasury-plan-for-buying-toxic-asset-is-complex-beyond-belief/

[Triana]

1. Same stupid shit. n/t

[ozymandius]

2. Our Treasury is tone deaf and stone stupid.

This feels like the runup to the Iraq invasion. The world protested. Sage minds thundered in opposition. Yet the moat of silence around the decision makers in Washington prevailed as not one gave a damn about what the little people, the governed, think. Not even progressive Nobel laureates - even the goddamn supply-siders who have sided with populist rage - have made a difference on this issue.

What to do?

[PSPS]

3. Hello "bad bank." Goodbye, Obama presidency.

Only two months into what was a promising presidency and it's already over if this harebrained idea really comes to fruition. It now seems inevitable.

[sendero]

4. This is the thing..

... that always worried me about Obama. The "Audacity of Hope?"

There is nothing audacious about hope, hope is fine but without the correct actions it is meaningless.

It looks like Obama has allowed his "hope" that this mess will go away blind him to the realities he faces.

And yes, the people are going to be PISSED a year from now when things are no better and the government has cratered the dollar. Much less 4 years from now.

[Donnachaidh]

5. and it begs the question -- if hope is taken away because Obama feeds the corporate crooks

WTF is going to happen in the next presidential election? McCain was BAD -- but Palin, Jindal etc., are worlds WORSE. If the middle class is still in the shitter by that time, does anyone really think they are going to vote for a 2nd term?

We may just see the birth of a viable third party candidate in 2012. But it will be a sad time for those who put all their backing behind someone who promised *hope* and gave us ownership of toxic assets.

[Sultana]

6. Bye-bye America and Obama presidency

[Doremus]

7. Rolling Stone likens this to our government taking over the shell game & continuing it.

I'm no economist but I don't see how this plan is much different from the schemes the crooks were running. I realize there's probably not enough money in the world to cover the staggering losses but there must be something better than this. Maybe targeted, controlled collapses of each individual bank after spinning off their successful divisions...? dunno.

For all of our sakes I sure hope this works but I can't help but feeling that a big fat dose of 'ENOUGH'! right about now would be quite cathartic.