Geithner Says Toxic-Asset Plan to Start in Six Weeks

[steven johnson]

Source: Bloomberg


Updated:  New York, May 20 11:07
London, May 20 16:07
Tokyo, May 21 00:07

Geithner Says Toxic-Asset Plan to Start in Six Weeks

- Treasury Secretary Timothy Geithner said he expects a pair of government programs to help banks remove their distressed assets will start by early July, policy makers’ next step in ending the worst credit crisis in decades.
“Working with the Federal Reserve and the FDIC, we expect these programs to begin operating over the next six weeks,” Geithner said in prepared testimony to the Senate Banking Committee today in Washington.
The Treasury’s Public-Private Investment Program will use $75 billion to $100 billion of government funds to finance sales of as much as $1 trillion in distressed mortgage-backed securities and other assets. The effort has two components, which the Treasury will manage in conjunction with the Fed and the Federal Deposit Insurance Corp.


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aenU5AEto8oM&refer=home

[spotbird]

1. Why would anyone buy this shit?

It makes me crazy that they are compounding an already horrific situation with more madness.

It is also impossible that these assets can't be unbundled. They keep the worthless ones with those that have value so someone will buy the lot, not because they can't be sorted.

[dkf]

2. Why would the banks want to use this anyway?

They all want out of TARP and Government control don't they?

[Oregone]

3. Why wouldn't they

They can sell their toxic assets to each other (or rather, swap them) at inflated prices almost entirely financed by the government. Essentially, they trade ownership of their assets in for 85 cents on the dollar of the price *they* determine, and then they leave the government holding their dick once they default on their end of the swap.

[high density]

5. FDIC helps determine the price

Also it remains to be seen whether or not troubled firms will be able to buy these 'assets.' Private capital is supposed to be involved as a part of keeping the pricing process as honest as possible. In addition, the private investors that take on this deal will assume their own risk on the money they put into the purchases. Yes, the government portion of funding is vastly larger, but that doesn't mean the private investors couldn't get burned at the same time if it all goes to hell.

[Vidar]

4. The biggest toxic asset is Geithner.