Monday, March 23, 2009

Blogging Treasury's Attempts At Disclosure

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&A time:

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. Sphere: Related Content
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Anonymous said...

Will the Treasury have a reserve requirement to address potential losses from tax payer guarantees of the non-recourse loans? In other words, will potential losses to non recourse loans come from as of yet non-existing TARP vintage, or will they come from and be reserved from the existing TARP? How is the budget affected in either case?

Anonymous said...

Is none of this subject to congressional approval?

Anonymous said...

It still all boils down to opportunity cost of money. Private capital may infuse but the question always remains could that capital be put to better use somewhere else and at less risk of future political 'intervention' (read clawbacks, populist uprising against 'excessive' profits) regardless of contrary guarantees today?

I have my doubts there are that many private capitalists willing to deal with the political hassle much less with their investors.