Analysis and report by Mark Pittman of Bloomberg News regarding another $1 trillion writedown for banks. (Bloomberg News) (Running time 4:00 minutes)///
Writedowns and asset sales…. how will these assets be purchased? Will it be an open and transparent process or a “rigged game”?
~~~~ “US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.
The plans proved controversial, with critics charging that the government’s public-private partnership - which provide generous loans to investors - are intended to help banks sell, rather than acquire, troubled securities and loans.
Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”.
Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.”
Participating in the plan as a buyer could be complicated for Citi, which has suffered billions of dollars in writedowns on mortgage-backed assets and is about to cede a 36 per cent stake to the government.
Citi declined to comment. People close to the company said it was considering whether to take part in the plan as a seller, buyer or manager of the assets, but no decision had yet been taken.” ~~~~
~~~~ “Individual citizens should be allowed to invest in the Public-Private Investment Program, which is aimed at removing toxic assets from the balance sheets of financial institutions, according to the chairman of the House Subcommittee on Capital Markets.
“While I was pleased to see you announce the Public-Private Investment Program to remove toxic assets from the balance sheets of financial institutions, I believe that average Americans of modest means should also be allowed to buy shares or have some means of buying into the program,” Rep. Paul Kanjorski, D-Pa., wrote in an April 2 letter to Treasury Secretary Timothy Geithner.
“By making this adjustment, you would be addressing concerns that this latest administration program too much resembles a rigged game for a select few insiders,” wrote Mr. Kanjorski, whose committee is part of the House Financial Services Committee.
He continued that that the program “fails to provide average Americans a tangible means of voluntary participation. Simply stating that taxpayers will share in the upside does not vest individual Americans with a sufficient degree of involvement,” Mr. Kanjorski wrote.
Despite his recommendation that citizens be allowed to participate, he expressed reservations about the program as it currently stands.
“Rather than providing a transparent method for public-private cooperation, the plan seems opaque and geared toward rewarding some of the very institutions whose recklessness and greed precipitated and exacerbated the ongoing financial crisis,” Mr. Kanjorski wrote.
“The American people will rightly question the method by which Public-Private Investment Program participants were selected to have the opportunity to gain what we all hope will be substantial profits.”~~~~
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