The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.
The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.
Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.
The price of all this? Up to another trillion dollars. Above and beyond the budget that is already running record deficits.
Will it work? Well, it would take significant money from investors to have any chance.
Yet Congress is doing its level best to drive investors away from the US with ex post facto confiscations.
I’m not real confident here.
it would take significant money from investors
Significant? Investors are being asked to put up 3% of the cash in exchange for 20% of the equity.
But it’s the gubmint being stingy. Sheesh.
Yves Smith over at the blog Naked Capitalism had a post on Saturday titled ‘Investor on Private Public Partnership:’One would have to be a criminal to participate in this.’ ‘ She works through an example of how the plan might work. Bottom line: Banks reduce losses, buyers of toxic assests make millions. Taxpayers lose millions. Another blogger says the plan will work if structered properly, the key word being ‘structured’. Wall Streeters are much sharper than the people writing the rules and will game the system to their advantage if it is not done right.
I don’t have a good feeling about this.
Additionally, I ponder that there will be alot of left wing finger pointing at capitalism when things don’t go as promised by That guy at Treasury.