Posts Tagged ‘U.S. Treasury Secretary’
HF managers are afraid to even touch TALF or PPIP, which seems shrouded in uncertainty
One of U.S. Treasury Secretary Timothy Geithner’s initiative, called the Public-Private Investment Program, or PPIP, has lost momentum, reported the Wall Street Journal on Monday, as big banks are worried about having to sell at fire-sale prices while small banks fear they would be shut out. Potential buyers balk at the risk of doing business with the government, concerned that politicians might demonize them for making big profits (coverage).
On March 23, 2009, the FDIC, the Federal Reserve and the U.S. Treasury announced the Public-Private Investment Program for Legacy Assets – which is designed to provide liquidity for toxic assets on the balance sheets of financial institutions. It is part of the Troubled Asset Relief Program (TARP) as implemented by Geithner. The major stock market indexes in the U.S. rallied on the day of the announcement.
PPIP has two parts, addressing both the legacy loans (which has since been postponed) and legacy securities (which is apparently still going ahead). The funds are meant to come from TARP monies, private investors, and from loans from the Federal Reserve’s Term Asset Lending Facility (TALF).
Large banks, which had positive revenues in Q1-2009 (some say partly due to the relaxation of the mark-to-market rules of FAS 157) and managed to raise significant capital through sales and share offerings, do not seem overly keen on participating.
Earlier this month, BlackRock, Franklin Templeton Investments, Invesco, PIMCO and Western Asset Management were reportedly among the candidates to run funds for the legacy securities portion of the PPIP. Blackrock last month claimed in a release: “the PPIP is one of the most important initiatives recently launched by the government and one that should, over time, help stabilize the banking system.” Bloomberg.com has just confirmed that the Treasury Department was set to name 8 to 10 asset managers for the PPIP this week . Once the asset managers have signed deals with Treasury, they each will be expected to raise at least $500m of private capital within 12 weeks.
Read full article here: http://www.opalesque.com/53173/New_York_Roundtable_HF_managers_are_afraid173.html
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