Obama considering funds to buy bad assets: report
(NEW YORK) The Obama administration is considering a plan to purchase bad loans and other distressed assets by creating multiple investment funds, according to The Wall Street Journal, quoting people familiar with the matter.
The funds would be part of what the administration is calling a private-public financing partnership that would take distressed assets off banks’ books.
No decision has been made on the partnership’s final structure, but a set of separate funds run by private investment managers is one leading idea, according to the Journal.
The managers, the Journal said, would have to put up a certain amount of capital while additional financing would come from the government. The government would share in any profit or loss.
The Obama administration announced its intention to partner with the private sector to buy US$500 billion to US$1 trillion of distressed assets as part of its revamping of the US$700 billion bank bailout last month.
This is central to its efforts to unglue credit markets, alongside a Federal Reserve programme aimed at spurring consumer lending in areas such as credit cards and home loans that was to be officially launched yesterday, the Journal said.
The government would contribute money from the US$700 billion bailout, with additional financing likely coming from the Fed and by selling government-backed debt.
Other investors, such as pension funds, could also participate. To encourage participation, the government would try to minimise risk for private investors, possibly by offering non-recourse loans, the Journal said.
The government wants to encourage private investors to buy up the assets in a way that would come closer to setting a market price where no market currently exists. Some within the administration believe establishing multiple funds could help with that goal.
The funds would most likely target all types of assets, such as mortgage- backed securities, rather than focusing on one specific type of distressed security, according to the Journal. — Reuters
Source : Business Times - 4 Mar 2009
Singapore Property - Buy, Sell, Rent, Invest
Mindy Yong
(+65)91002985
mindy@mindyyong.com
Credo Real Estate launches collective sale of Culford Garden at Siglap »« Two East Coast en bloc sites on market
