Video Update: Summers on Plan and Krugman….Market Mover Monday: Son of TARP: Treasury Toxic Asset Plan…

Video Update: 3:12pm EST: Bloomberg spoke to Summers about the plan and Krugman’s objections to it..

Live! From the White House – Exclusive Interview with National Economic Council Director Larry Summers (Bloomberg News)

Update: Timmeh speaks to us via WSJ OpEd this time, LOL

(How Timmeh Learned to Stop Worrying and Love the Debt, h/t Cramer):

The American economy and much of the world now face extraordinary challenges, and confronting these challenges will continue to require extraordinary actions.

Oh good grief not again with this…

No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk. Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small-business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated.

Way to suck up and keep the divide going, ugh:

This requires those in the private sector to remember that government assistance is a privilege, not a right. When financial institutions come to us for direct financial assistance, our government has a responsibility to ensure these funds are deployed to expand the flow of credit to the economy, not to enrich executives or shareholders. These provisions need to be designed and applied in a way that does not deter the participation by the private sector in generally available programs to stabilize the housing markets, jump-start the credit markets, and rid banks of legacy assets….

If I ran a fund I would tell him to frak off…more at the link, the .pdf below is far more useful to describe the program….

Steve Liesman of CNBC notes the documentation says the Exec Comp limits of other plans do NOT apply to this one, and if you think they can guarantee that I have some HOT land in Hona to sell you….

What we’ve all been waiting for, but who will participate in this atmosphere ..

They kept TImmeh off stage this time, heh

DOW Futures up over a hundred, global markets popped on the news…

Treasury Press Release here

The Public-Private Investment Program for Legacy Assets
To address the challenge of legacy assets, Treasury – in conjunction with the Federal Deposit
Insurance Corporation and the Federal Reserve – is announcing the Public-Private Investment
Program as part of its efforts to repair balance sheets throughout our financial system and ensure that
credit is available to the households and businesses, large and small, that will help drive us toward
Three Basic Principles: Using $75 to $100 billion in TARP capital and capital from private investors, the Public-Private Investment Program will generate $500 billion in purchasing power to buy legacy assets – with the potential to expand to $1 trillion over time.

The Public-Private Investment Program will be designed around three basic principles:
Maximizing the Impact of Each Taxpayer Dollar: First, by using government financing in
partnership with the FDIC and Federal Reserve and co-investment with private sector investors,
substantial purchasing power will be created, making the most of taxpayer resources.
Shared Risk and Profits With Private Sector Participants: Second, the Public-Private
Investment Program ensures that private sector participants invest alongside the taxpayer, with
the private sector investors standing to lose their entire investment in a downside scenario and
the taxpayer sharing in profitable returns.
Private Sector Price Discovery: Third, to reduce the likelihood that the government will
overpay for these assets, private sector investors competing with one another will establish the
price of the loans and securities purchased under the program.
The Merits of This Approach: This approach is superior to the alternatives of either hoping for banks to gradually work these assets off their books or of the government purchasing the assets directly.
Simply hoping for banks to work legacy assets off over time risks prolonging a financial crisis, as in
the case of the Japanese experience. But if the government acts alone in directly purchasing legacy
assets, taxpayers will take on all the risk of such purchases – along with the additional risk that
taxpayers will overpay if government employees are setting the price for those assets.

Two Components for Two Types of Assets: The Public-Private Investment Program has two parts, addressing both the legacy loans and legacy securities clogging the balance sheets of financial firms:

Legacy Loans: The overhang of troubled legacy loans stuck on bank balance sheets has made it
difficult for banks to access private markets for new capital and limited their ability to lend.
Legacy Securities: Secondary markets have become highly illiquid, and are trading at prices
below where they would be in normally functioning markets. These securities are held by banks
as well as insurance companies, pension funds, mutual funds, and funds held in individual
retirement accounts.

Here is the part where PIMCO is willing to step in but everyone else is afraid of being taxed:

Involving Private Investors to Set Prices: A broad array of investors are expected to participate in the Legacy Loans Program. The participation of individual investors, pension plans,
insurance companies and other long-term investors is particularly encouraged. The Legacy
Loans Program will facilitate the creation of individual Public-Private Investment Funds which
will purchase asset pools on a discrete basis. The program will boost private demand for
distressed assets that are currently held by banks and facilitate market-priced sales of troubled


The US Treasury Monday revealed details of a plan to set up public-private investment funds that will buy up to $1 trillion in troubled loans and securities at the heart of the financial crisis.
The initial goal is to “generate $500-billion in purchasing power,” as the government put it in its plan fact sheet, but the cost could reach $1 trillion. About $75 to $100 billion of the government funding will come from the second tranche of the TARP.

March 23, 2009. Tags: , , , , , , , , , . Cabinet, Economy, FDIC, Film, Finance, Obama Administration, Politics, Popular Culture, TARP, Taxes, Wall St.


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