The Obama administration is due to release details for the "Troubled Assets" on the Bank's books later this week. Those would be the "Mortgage Loans" that went on the bank books in 2006 before all of this mess happened.
It appears to me that the plan fall along the lines of this... If the assets have been sitting on the bank books for an extended period of time, and maybe they have had a few lates on the mortgages, then the government is going to loan money to Private Investors to purchase them. If the loans have been made under the newer, strict guidelines of the last 18 months, then the loans will be purchased through the new TALF program. This program means the government is purchasing the loans directly, we ("the people") will hold them, and sell them to banks once all of this mess is over.
If you are an Investor... purchasing mortgages from the banks, with government money, for pennies on the dollar seems like it would be a darn nice deal! I am NOT complaining here! Ohhh NO! We desperately need a plan for purchasing mortgages, so that we can get rates lower!
From Andy Lees at UBS:
The U.S. will give further details of the Geither public/private partnership plan to take bad assets off banks books, later this week a senior department official has said. The official said that the Treasury wants to put out enough information in the coming week so that the potential participants can better judge the proposal. It will also detail the timeframe in which it will become operational.
So far the plan is expected to leverage both public and private capital to buy assets using government financing. The initial funding would be from what remains of the USD700bn financial rescue fund, but a "placeholder" provision in President Obama's fiscal 2010 budget plan signals a possible request of around USD750bn in new funds.
Neel Kashkari, the Treasury's interim administrator for the USD700bn rescue fund told law makers last week that private investors are ready to invest in distressed mortgage assets if they can get financing.
With no private financing available, they could only pay prices that are too low for banks to be willing to accept. The bad asset plan is expected to be structured along similar lines to the TALF, which is scheduled to launch this week, although the TALF will be restricted to funds investing in highly rated asset-backed securities.
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