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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
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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.

The proposed investments funds would use some of the government's $700 billion in bailout money coupled with additional contributions from the Federal Reserve.
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)
Treasury Secretary Tim Geithner's hand rests on the table as President Barack Obama addresses the National Governors Association last week.
Treasury Secretary Tim Geithner's hand rests on the table as President Barack Obama addresses the National Governors Association last week.   (AP Photo/Charles Dharapak)
The Obama administration plans to partner with the private sector to buy up to $1 trillion in bad assets to unclog credit markets.
The Obama administration plans to partner with the private sector to buy up to $1 trillion in bad assets to unclog credit markets.   (©photo_ticker)
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COMMENTS
Showing 3 of 3 comments
Guest
Mar 4, 2009 5:07 AM CST
Fire all the bankers. I can think of a few other people to hire, such as myself and hubby. We heard the ads for the impossible mortgages and wondered when Attorneys-General would issue cease and desist letters because there was no way 100+% mortgages, with no income verification, pay whatever you want, ARM could be a good idea. Since bankers did not know that but we did, obviously we're better qualified. I'd imagine there're many more of us who would make much better bankers. We agree that with a little sacrifice, we can live on $500k/year salaries with no bonuses. Barely, but we'll be able to do it.
Mr.C
Mar 3, 2009 6:30 AM CST
how many angles can we go at this thing? anyone keeping count?
Doctor-Zaius
Mar 2, 2009 7:33 PM CST
As many as it takes to fix it. It's a lot easier to ruin an economy than it is to fix one.

Fed calls for swift action on bad banks
Reuters

 
Treasury Department • credit crisis • investment fund • bailout • Obama administration • financial crisis • Wall Street bailout • bad bank • toxic assets • TALF

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