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Hedges, Private Equity Funds to Invest in Bailout

TALF program could see very rich outfits get even richer

By Jason Farago,  Newser Staff

Posted Mar 6, 2009 7:11 AM CST
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(Newser) – With its highly touted TALF program to spur consumer lending, the government is undertaking a $1 trillion effort that hinges on the participation of some unpopular outfits: hedge funds and private equity firms. As the Washington Post reports, the Fed and Treasury's "public-private partnership" relies on investment from the only people who still have cash on hand—and could make them considerable profits without much risk.

The Term Asset-Backed Securities Loan Facility will see investors use their own cash plus federal money to buy securities that finances consumer loans for Americans. If the asset appreciates, the investor profits while the government gets cash flowing; otherwise, the Treasury covers the loss with federal bailout money. Steven Schwartzman, CEO of Blackstone, the private equity giant, said the government financing made the TALF program "highly attractive."

Treasury Secretary Timothy Geithner prepares to testify on Capitol Hill in Washington, Tuesday, March 3, 2009, before the House Ways and Means Committee.
Treasury Secretary Timothy Geithner prepares to testify on Capitol Hill in Washington, Tuesday, March 3, 2009, before the House Ways and Means Committee.   (AP Photo/Susan Walsh)
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Tuesday, March 3, 2009, before the Senate Budget Committee.
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Tuesday, March 3, 2009, before the Senate Budget Committee.   (AP Photo/Susan Walsh)
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, Feb. 25, 2009, before the House Financial Services Committee.
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, Feb. 25, 2009, before the House Financial Services Committee.   (AP Photo/Lawrence Jackson)
Treasury Secretary Timothy Geithner appears before the Senate Finance Committee on Capitol Hill in Washington, Wednesday, March 4, 2009, to defend President Barack Obama's fiscal 2010 federal budget.
Treasury Secretary Timothy Geithner appears before the Senate Finance Committee on Capitol Hill in Washington, Wednesday, March 4, 2009, to defend President Barack Obama's fiscal 2010 federal budget.   (AP Photo/J. Scott Applewhite)
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COMMENTS
Showing 1 of 1 comment
wwwonderer
Mar 5, 2009 10:49 PM CST
So now they get to get things dirt cheap and go long? Is that how it goes? Why not invest with no risk? Trickle on indeed.

How TALF works
Wall Street Journal

Executive compensation restrictions had hampered earlier proposal
Financial Times (UK)

 
private equity • Federal Reserve • Treasury Department • Blackstone • consumer loan markets • bailout • hedge funds • TALF

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