Investors ready to buy U.S. government-backed toxic assets?

March 11, 2009 by · Leave a Comment
Filed under: Opinion 

If you actually analyze the press release, its a load of crap (pardon me) but that is what it is.   The basis of this approach is instead of discovering the “real” price of these “toxic” assets, we would rather have the government provide financing for assets that are worth very little if anything to investors that would not normally purchase these if they did not have government financing.  Here is my favorite quote “Neel Kashkari, who administers the Treasury’s $700 billion Troubled Asset Relief Program, told a U.S. House of Representatives Oversight and Government Reform subcommittee that without financing private investors would pay such low prices for the assets that bank balance sheets would be hurt.”  Let the balance-sheets be hurt, they made bad choices and this is how a market economy deals with them.

News:

A U.S. Treasury-led effort to soak up toxic assets from bank balance sheets could draw in private investors with the right government financing, a senior Treasury official said on Wednesday.

Neel Kashkari, who administers the Treasury’s $700 billion Troubled Asset Relief Program, told a U.S. House of Representatives Oversight and Government Reform subcommittee that without financing private investors would pay such low prices for the assets that bank balance sheets would be hurt.

“We’ve received inbound unsolicited proposals from the private sector saying, ‘We have capital on the sidelines, we want to go after these assets,'” Kashkari said.

“One of the key challenges is that there’s no financing available to the private sector investors, so by marrying government capital — taxpayer capital — with private capital and providing financing, you can enable those investors to go after those assets at a price that makes sense for investors and a price that makes sense for the banks,” he added.

Kashkari said the program, which is expected to be detailed by Treasury Secretary Timothy Geithner in coming weeks, would put public capital alongside private capital in purchasing assets, so that “if private investors win, taxpayers win.”

Kashkari’s comments about the need to provide financing echoes what many investors have said in recent weeks, with hedge funds, private equity firms and money managers saying that the government must provide leverage in order to attract interest in buying up toxic assets.

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