In March, Treasury Secretary Timothy Geithner unveiled a Public-Private Investment Program in which the government and private firms would bid together to purchase toxic assets from banks, freeing them to increase lending and help revive the economy.
The program’s still not operating.
“We’re committed to getting it done, and expect to have it very, very soon,” said Andrew Williams, a Treasury spokesman. “It’s complicated and takes time.”***
Geithner is expected to announce this week the names of asset managers he’s decided to let participate in government-backed auctions of these troubled bank assets. Initial bold estimates of up to $1 trillion in asset purchases, however, have been scaled back to between $20 billion and $50 billion.
Even that’s questionable because banks may not want to part with assets voluntarily if they find the auction bids too low. Banks think that the assets have value, but until the housing market stabilizes, it’s difficult to price them.
“The banks are finding that if they raise enough capital they can hang on to those assets,” said Bert Ely, a banking consultant. Banks are trying grow their way out of their toxic-asset problem, but that takes time, and meanwhile the economy remains in the doldrums.
Why can’t they just do with the bad assets what they did with everything else the past couple decades? Just splice ’em up a bunch, sell and re-sell them so many times that no one knows what the hell is what, bundle them up, have the ratings agencies slap a AAA rating on them, and sell them to small towns in Georgia and Norwegian pension funds. Voila! Problem solved! Then have AIG insure them, and Goldman can make another ten billion in default swaps and hand out some bigger bonuses. Also, rename them- they are not bad assets, they are “Under-Priced Yields Offering Untold Riches For Offshore Overseas Longterm Speculators (UPYOURsFOOLS).” Screw you Kenny Lay! Let’s get rich, bitches! What could go wrong?