One of few counselors to Geithner who have not resigned Gene Sperling and counsel Matthew K. Baker are joined by Muffie Benson-Perella.
Gains which "are hoped to be made" will be shared with the private investor...Losses which are hoped to not be made, will be footed by the taxpayer.
Life would be different if credit markets were "functioning"
"A problem of great scale and complexity" Indeed. "Will be a long road as we tweak these solutions and try other solutions": TALF 3.0 thru 17.3 coming soon
"FDIC has experience in running failed auctions" Practice makes perfect
Two programs on securities side: TALF2 expansion is up and running to address "highly illiquid" markets. Assets are discounted as can not be purchased on a leveraged basis...
"TALF provides modest amount of leverage" uh... modest? 6 to 1 is considered CCC- even by S&P
Asset managers will be picked from a RFP sent out today.
"We are committed to seeing this through." Worked miracles with TARP 1.0
Q. What will qualifications be for asset managers to be picked to manage assets?
- All posted on the website. 1) How long have assets been managed 2) AUM 3) performance track record 4) How individual investors would participate 5) Women and minorities should be accounted for too. "Will go thru extensive procedure to comb thru and decide on who is picked"
"Over $2 trillion dollars in legacy securities"
Brad DeLong teaches 1830s English history to Sperling
Bottom line according to DeLong: "You are spending $100 billion today which will do some good, but will keep throwing money at the problem until the job is done"
"Would not characterize what we are doing as modest. Trying to leverage our dollars in the best possible way"
Q from John Carney: Valuations may be so low that banks would still not be willing to part with their assets. Is there profit potential?
"Can not guarantee participation, can try to lower the bid/offer spread. If banks have a path to sell asset base, even at a loss, but can access private markets again, there will be a willingness for them to participate"
Call is over - people are still asking questions... typical Treasury. No moderator, no one to even push the disconnect button.
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