Funding for 'Bad Banks' Starts to Get Fleshed Out
These private investment managers would run the funds, deciding which assets to buy and what prices to pay. The government would contribute money from the $700 billion bailout, with additional financing likely coming from the Federal Reserve and by selling government-backed debt. Other investors, such as pension funds, could also participate. To encourage participation, the government would try to minimize risk for private investors, possibly by offering non-recourse loans...
Thurgy: I guess it was Back door Leveraged Lending after all.
Instead, the government wants to encourage private investors to buy up the assets in a way that would come closer to setting a market price where no market currently exists... The Treasury has agreed to provide up to $100 billion of capital to the TALF, and the Fed will lend up to $1 trillion through the program... Such a move would raise new questions, chief among them the type of protection the Treasury would offer against such risky assets...Thurgy: What the government would like to do is dupe private investors, even pension funds. Prices will be set using flawed models that assumes a positive GDP next year. There is a market for the assets, the banks are not willing to accept the markets price as long as they know they will continue to be bailed out. The model pricing they will use will not include another 20% drop in home prices, which is closer to reality than his Bernanke's lie.
Fed officials have spent months sorting out these and other details with market participants. Earlier this year, they had pledged to launch the program by February, but missed the goal...Many details remain unclear, in particular, how the government and the private sector will share the risk. An administration official said a key goal is to provide investors with "price safety" so they feel safe enough to get back into the market... The TALF, which was announced in November, has taken months to get off the ground. To date, no deals have been done under the program. The first is expected to be launched later this month...
Thurgy: Spent months working on this one, but the details remain unclear. However, we're still set for launch later this month!!! Oh, btw, we're NOT making this up as we go. We've planned this all along.
One thing they have planned for all along was to continue bailing out banks at whatever expense to the taxpayer. Like the money we give to AIG is just being handed over to Goldman Sachs and other banks because of the bad bets made by AIG.
