LyrArc Article Gist
The Public Private Investment Program announced by Treasury Secretary Geithner finally gets underway in October 2009. Black Rock, a group led by the Wellington Company and a group led by Alliance Bernstein are private participants in the effort to get private participation to rid banks of bad loan assets. Five of nine money management firms selected by Treasury to buy toxic mortgage related securities have raised the minimum of $500 million from investors each, to qualify for matching government loans. In total the program will allow money management firms to buy up $12 billion in bad assets. THe IMF estimated last week that financial institutions around the world have still on their books $2.8 trillion in troubled mortgages and securities. Only half of that amount has been booked in losses, which leaves $1.4 trillion still to be resolved. $12 billion is less than 1% of this, which begs the question how will this make a difference? Treasury only hopes that this will restart trading in bad assets and help establish market prices for these assets. If unemployment worsens and the economy sees a sudden relapse in the near future this $1.4 trillion in bad assets will continue to create serious problems for financial instituions and the international financial system.