Geithner ready to unveil Treasury's trillion-dollar toxic assets plan

Discussion in 'Politics' started by D_Ireonsyd_Colonrinse, Mar 22, 2009.

  1. D_Ireonsyd_Colonrinse

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    Associated Press:

    WASHINGTON - The Obama administration’s latest attempt to tackle the banking crisis and get loans flowing to families and businesses will create a new government entity, the Public-Private Investment Program, to help purchase as much as $1 trillion in toxic assets on banks’ books. The new effort, to be unveiled Monday, will be followed the next day with release of the administration’s broad framework for overhauling the financial system to ensure that the current crisis — the worst in seven decades — is not repeated.

    A key part of that regulatory framework will give the government new resolution authority to take over troubled institutions that would pose a threat to the entire financial system if they failed.

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    from The New York Times:

    The three-pronged approach is perhaps the most central component of President Obama’s plan to rescue the nation’s banking system from the money-losing assets weighing down bank balance sheets, crippling their ability to make new loans and deepening the recession. Industry analysts estimate that the nation’s banks are holding at least $2 trillion in troubled assets, mostly residential and commercial mortgages.

    The plan to be announced next week involves three separate approaches. In one, the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money that those partnerships will need to buy up troubled assets that banks want to sell. In the second, the Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money. In the third piece, the Treasury plans to expand lending through the Term Asset-Backed Securities Loan Facility, a joint venture with the Federal Reserve. The goal of the plan is to leverage the dwindling resources of the Treasury Department’s bailout program with money from private investors to buy up as many of those toxic assets as possible and free the banks to resume more normal lending.

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    If somebody could explain to me in layman's terms how we're going to free up toxic assets so that banks will "resume more normal lending", I'd appreciate it.

    Also: if AIG and Citigroup and other government-owned entities eventually buy their way out of debt (when the economy stabilizes and banks "lend normally"), doesn't the government get back all the bailout money -- and eventually even turn a profit with interest on lent monies?
     
  2. Flashy

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    of course...where have you been WT?

    part of the agreement is the warrants and interest rates the government has been given by AIG and Citibank

    did you think the government was just throwing away the money and not asking for its return?

    this is precisely why i have been so angry with certain posters on here screaming about AIG and the bailout money. It is not like there are not plans that allow the government to recoup the money if the company turns around.

    the point of selling off assets eventually is part of repaying the government, not to mention the interest and warrants the government holds as part of the agreement.
     
  3. Flashy

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    the government is going to buy all the shitty, debt and assets that are on the balance sheets of the banks, which are holding down their credit rating, absorbing their available cash instead of being able to lend, and causing their share prices to be depressed since the banks are not able to get out from under the bad loans they made and the interest payments they are not receiving from the people who owe them.

    Essentially, the government will now hold all those, and the banks will be "free" to operate like before, and the government, will assume the 2 trillion worth of garbage and toxic mortgages that the banks are buried under.

    so essentially, we the taxpayer (the government) in concert with some private investors willing to take chances, are going to "own" those bad debts now, freeing the banks to go back to what banks did before they get swamped in the sub-prime debacle.
     
  4. SpeedoMike

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    the government could shoot the top 25 executives in each bailed-out company and some people still wouldn't be satisfied.
     
  5. HazelGod

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    Apparently, you would, Mr. Taxpayer. Duh.
     
  6. Flashy

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    well, obviously alot will depend on just what terms Geithner is proposing.

    and you hit the nail on the head...not many people in their right mind would do this, which is why everyone is so against the plan. It might be leaking out now, but it is the same plan they were touting a couple weeks back, and it is already drawing a ton of fire, because it does not address the underlying problem which is the banking system. this just say "la la la...everything is fine underneath all this, so once we clear all the toxic, everything will be fine..." and that is not the case.

    obviously, part of the premise of the plan, is that once the toxic assets are off the books of the banks, in the custody of the government, the banks will begin lending again, the economy will pick back up, stock market will rebound, folks will have more money again, ostensibly to maybe invest at some bargain prices.

    My view is that the private investors, such as hedge funds, investment firms, institutional investors, private real estate firms etc. etc. etc. will be enticed to "partner" with the government, base on the government "insuring" a certain degree of their investments,

    the best way to describe "toxic" assets is that they are very uncertain. Sort of like defaulted junk bonds etc...

    they involve a significant degree of risk to the buyer.


    their value is totally degraded, the original holder cannot pay the interest, so the bank is stuck with them. (the basic definition)


    this is probably the best read you will find on it from someone who is a "liberal" Paul Krugman, who already has given the plans a thumbs down.

    Despair over financial policy - Paul Krugman Blog - NYTimes.com
     
  7. houtx48

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    you're never going to see the light of day from AIG. if the next 20 years were as profitable as the last 10 if will take them at least 25 years to pay it back and that does not include interest. using a previous Flashy post for the numbers.
     
  8. B_starinvestor

    B_starinvestor New Member

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    Hout - the repayment of the funds extended to AIG isn't solely reliant on AIG earnings.

    The gov't owns a substantial stake in AIG securities; and if and when those security prices rise, they can be redeemed/sold at a profit for the gov't.

    They will also be collecting dividend payments from preferred stock holdings in AIG.
     
  9. houtx48

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    you seen any raise in price yet?lolllllllllllllllll...............there will be no dividends.
     
  10. D_Ireonsyd_Colonrinse

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    As Geithner unveils his bank rescue plan today - to buy up & get toxic assets off the books - the Dow is currently up 295, the markets surging.

    Some undisclosed firms are stepping forward to take part in Geithner's public-private partnership according to the WSJ.

    Why do I get the feeling that conservatives will despair if all this eventually starts to come together?
     
  11. B_starinvestor

    B_starinvestor New Member

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    If this comes together, I'll be dancing in the streets. Trust me.
     
  12. lucky8

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    Troubled Asset Relief Program
     
  13. sargon20

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    Anything a democrat can do a republican can do better. Of course there will be despair and denial.

    They will go through the stages of grief:

    1. SHOCK & DENIAL
    2. PAIN & GUILT
    3. ANGER & BARGAINING
    4. "DEPRESSION", REFLECTION, LONELINESS
    5. THE UPWARD TURN
    6. RECONSTRUCTION & WORKING THROUGH
    7. ACCEPTANCE & HOPE

    But they will stop at #4 and eventually die bitter and lonely listening to Rush. While some will stop at #3 as some here have been since Jan 20th.
     
    #13 sargon20, Mar 23, 2009
    Last edited: Mar 23, 2009
  14. pym

    pym New Member

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    OR......if you are :alien: 'SpaceThing' :alien:..........You will view each and every Success and triumphal News report regarding Mr.Obama's Presidency as something to blow a load on.:wank:{Not like he needs Politics as an excuse to constantly pull his pud like an ape....... :3822733875wackit: .......though.}

    Where's my mirror......gawd-damn-it......MOM!!
     
  15. D_Ireonsyd_Colonrinse

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    And the Dow closes up 500 points.

    ding ding ding ding!... Nice little rally, guys. The markets indicate approval. Drinks all around. Let's all get on the same page now libs and cons! America's at stake.

    Kudos, Timothy.

    Day One a success. Bottoms up! (that's meant to indicate glasses not asses)
     
  16. Flashy

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    who woulda thunk it...amazing what you can do when you stop demonizing the "investor class", get a president to shut his mouth and stop panicking the markets, allow the fed chief to do his job, you get the secretary of the treasury to finally get together a semblance of a plan and actually describe it properly, and bingo, you do this thing called *RESTORING* confidence. along with some unexpected good housing numbers, and Voila, investors will come back...

    until, that is, geithner fails to announce more about shoring up the banks, and they start talking about the absurd 3.2 trillion dollar budget.

    let me stress again who staged this rally...

    *PRIVATE INVESTORS*

    *HEDGE FUNDS*
    *PENSION FUNDS*
    *MUTUAL FUNDS*
    *INSTITUTIONAL INVESTORS*



    stop demonizing these people, blaming them, and put away the torches and pitchforks and we just may get out of this yet.
     
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