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Archive for "Apr 01 2009"

More ‘Toxic-Asset’ Insanity From Obama’s Treasury

“Turbo Tax” Geithner is dumber than a rock, or firmly planted in Goldman Sachs’ wallet:

The investment community was already suspicious last week when Secretary Timothy Geithner unveiled his plan, announcing that Treasury would select four or five companies as “fund managers” to purchase toxic securities. Given that the whole idea is to create a liquid market for these assets, we'd have thought Treasury would encourage as many players as possible.

But the bigger shock was when Treasury released its application to become a fund manager, a main rule of which is that only firms that already have a minimum of $10 billion in toxic securities under management can apply. Few hedge funds, private equity players or sovereign wealth funds come near this number. The hurdle would bar many who specialize in the very distressed assets that the Obama Administration is trying to offload from banks.

via Treasury’s Toxic-Asset Purchase Plan Preselects Private Investors – WSJ.com

While dozens of banks and insurance companies today hold more than $10 billion in toxic securities, the vast majority are trying to get these assets off their books — not lining up to buy more. As for asset management firms that hold such a big portfolio — and are also healthy enough to serve as fund managers — there is only a small pool, such as Black Rock, Pimco, Goldman Sachs or Legg Mason, as well as a titan or two of the hedge fund industry, such as Bridgewater.

“This is ugly,” says Joshua Rosner, the managing director of Graham, Fisher & Co., an independent research firm. “As long as they are experienced, there is no rational reason for creating limitations on who becomes a bidder and manager of assets. It doesn’t serve the public good, though it may serve those few large firms that appear to have a privileged relationship with Treasury.”

It is bad enough that Treasury is unwilling to share any details about TARP funds that have already been dispersed (or even know how much money they have left); it now seems they are limiting the number of firms allowed to participate in this toxic-asset scheme, a scheme where participants can reap the profits while taxpayers will be on the hook for losses.

Remind me again why it was so bloody important that we have this tax cheat running the Treasury? Hell, coming up with a plan that boils down to, “You help me out of this jam and any money that’s made goes to you, and I’ll cover any dough you lose” ain’t exactly rocket science.

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