Will the Treasury/FDIC re-direct investment capital towards bad assets?
*Financial Times, by Alan Rappeport, March 23, 2009:
"The US Treasury unveiled a $1,000bn plan on Monday to relieve banks
of the toxic assets plaguing their balance sheets in hopes of restoring
stability and confidence in the stricken financial sector.
The Treasury will put $75bn to $100bn of the original $700bn troubled
asset relief funds (Tarp) voted by Congress last October, into a public
private investment programme. The Tarp funds will be used as government
equity and partnered with private funds to purchase troubled loans or
securities. That public and private equity would be leveraged by credit
from the Federal Deposit Insurance Corporation, in the case of loan
purchases, and the Fed Reserve’s term asset-backed securities loan
facility (Talf ) programme, in the case of securities.
The programme, which Treasury called an effort to 'repair balance
sheets throughout our financial system' and to 'drive us toward
recovery' is divided into two separate schemes. One targets ‘toxic’
credit securities and the other focuses on portfolios of more
traditional loans deteriorating due to the recession. Through the plan,
the government will generate $500bn in purchasing power, with the
potential to expand to $1,000bn.
For toxic securities, the government will authorise up to five
investment managers to raise equity capital with the government
matching the equity dollar for dollar. The Treasury would also lend the
joint venture fund up to 50 per cent of its equity in the form of
senior debt. These funds would then bid for assets, with the private
partner deciding the price. The five new joint venture funds would be
able to draw on Fed Talf financing."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
Call Now
Let us help you:
Personal Advisors
available now at
1-800-444-8317