from SLATE: >Treasury Secretary Timothy Geithner formally unveiled the White House plan to >clean out toxic assets from banks' balance sheets on Monday, and investors >gave it the equivalent of a standing ovation. Contrary to what happened in >early February when Geithner first outlined the plan in such general terms >that everyone was disappointed, stocks surged around the world yesterday. The >Dow Jones industrial average jumped 6.8 percent, its biggest gain since >October, suggesting that "investors bet that the government may have finally >found a way to fix the nagging problem at the core of the financial crisis," >notes the Los Angeles Times. The Wall Street Journal says "the reaction seemed >more a sigh of relief at seeing some details of the program, after weeks of >waiting, than an overwhelming endorsement," particularly since "much fine >print is still to be spelled out." The New York Times takes the broadest look >at the three-part plan that could end up purchasing "up to $2 trillion in real >estate assets" and points out that it was "bigger and more generous to private >investors than expected." The Washington Post hears word that administration >officials "made changes to the plan in recent days in a way that makes it more >favorable to private investors." ...
> Under the complex plan outlined by Geithner yesterday, the government would > join forces with the private sector to purchase individual home loans as well > as mortgage-backed securities. The Treasury will use up to $100 billion from > the financial rescue funds already approved by Congress to match > contributions made by private investors. The public-private ventures would > get further help from the government through loans from the Federal Reserve > and loan guarantees from the Federal Deposit Insurance Corp. These programs > could buy as much as $1 trillion in public assets. In addition, the > government could put $1 trillion more into the toxic assets by using the Term > Asset-Backed Securities Loan Facility, known as TALF, which will be expanded > to finance existing troubled securities. > Investors were largely enthusiastic, or at least some were. Almost all the > papers quote Bill Gross, the co-chief investment officer of Pimco, the > nation's largest bond investor, calling the program "perhaps the first > win-win-win policy to be put on the table." Investors do have plenty to be > optimistic about since "the Treasury was offering to lend up to $6 for every > $1 of investors' own money," as the NYT explains, which means taxpayers would > lose the most if the investments turn sour. The WP, which is the most openly > skeptical about the plan, says some analysts think the government may be > handing out too much of the potential upside to investors when it should be > going to the taxpayers. The program also involves a major risk considering > that if the Treasury uses all of the $100 billion from the $700 billion > bailout plan, there will only be $12 billion remaining, which means Geithner > will have fewer options if another financial institution desperately needs > cash to survive. > The WP and LAT highlight that the program simply might not work, considering > that it's unclear how the government would persuade banks to sell assets if > they see the prices as too low. USAT points out that in "prior situations in > both the USA and abroad, governments have forced banks to sell their bad > assets." The paper also says that the typical buyers of securities, such as > hedge funds, don't have much cash lying around so it's likely that the > biggest buyers would be so-called vulture investors, who would only be > interested in the securities if they're real cheap, something banks may not > be interested in since it'd mean they'd have to record big losses in their > books. > The WSJ says there's currently "a chess match of sorts" that is playing out > between banks and investors. Banking executives are reluctant to sell assets > at a deep discount since that could force them to raise more capital. Experts > say banks that have already taken write-downs on their assets could be more > willing to accept a cheap price for their assets. The LAT quotes the lobbyist > of a financial trade group who says that even if many banks refuse to > participate, the program should at the very least determine a market price > for toxic assets. A shortage of information on how much these assets might be > worth is part of the reason why the credit markets have seized up over the > last few months.... > The WP fronts word that the White House is "considering asking Congress" to > allow the treasury secretary to seize a whole slew of financial companies, > including hedge funds and insurers, if their collapse would threaten the > economy as a whole. Currently, the government only has the authority to seize > banks. This would "mark a significant shift from the existing model of > financial regulation" because someone in the president's Cabinet would have > authority over companies that are currently overseen by a number of > independent agencies. Geithner is set to talk about the issue today at > hearing on Capitol Hill that will focus on the American International Group > bonuses. Some think that if the government had been able to seize AIG when it > was clear that the insurance giant was in trouble, the whole process of > winding down its operations could have been cheaper for taxpayers. If the > treasury secretary had this power, it could take a number of steps to prevent > a firm's collapse, including, significantly, breaking contracts... >The bad economy is sending people to the candy shop, reports the NYT. >So-called "nostalgic candies" like Necco Wafers and Mallo Cups are >particularly popular, and customers seem to prefer "cheaper, old-fashioned" >sweets, which is a significant reversal from last year when mass-market >candies were losing ground to luxury brands. Many candy makers are reporting >surprisingly healthy profits and stores say they're struggling to keep up with >demand. The owner of a candy store in San Francisco said it best: "All is well >in candy land." < -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
