Tim Geithner gave an interview on Sunday to the WSJ to unveil the next leg of the stimulus plan. What makes this one interesting is that this plan is being released under the guise of a public/private partnership with the government providing some cash and private investors providing more cash with government guarantees.
On the surface this seems like a great idea; the government working hand in hand with private investors to flush the toxic assets out of the system. The taxpayer lowers his risk, private investors get some upside and banks can more quickly flush out the toxic sludge. However, after a few minutes of reading things come into focus - this is turning out to be yet another TARP injection under a different banner.
Consider - the target amount set for this fund is $500B of purchasing power with the government fronting $100B cash up front and allowing 6 to 1 leverage. So right from the start, the government has already reached its goal in terms of purchasing power. How do they see this playing out? Institutionals throwing their fiduciary cap on the floor to put their red/white/blue cap on and buying into this thing?
In actuality, this is going to be a case where opportunistic distressed investors are going to swoop in to pick up the best deals, backed by government subsidies and guarantees. The whole differentiator of this program was supposed to be a joint collaboration between the government and private investors, but much like many of the other gov't programs Zero Hedge has highlighted the taxpayer is going to be left covering the downside.
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