Investment Funds May Replace 'Bad Bank'

Administration eyes creation of private funds to suck up toxic debt
By Rob Quinn,  Newser Staff
Posted Mar 3, 2009 4:50 AM CST
The proposed investments funds would use some of the government's $700 billion in bailout money coupled with additional contributions from the Federal Reserve.   (Shutter Stock)
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(Newser) – The Obama administration is considering creating multiple investment funds to buy up the toxic debts at the heart of the financial crisis, insiders tell the Wall Street Journal. No fixed structure has been agreed upon, but under one leading plan the funds would be administered by private investment managers who agree to add private capital to the government's bailout money.

The funds—which would be tasked with buying as much as $1 trillion of banks' distressed assets—may also allow other private investors such as pension funds to participate. Under the government plan, the public-private partnership would set a price for the assets, for which no market currently exists, and is working on ways to establish enough "price safety" to coax  investors.