Lawrence Summers on Fox News Sunday

[bill]

PT1http://www.youtube.com/watch?v=L9edo-YeVK0
PT2http://www.youtube.com/watch?v=mVaNC...eature=related

Transcript
Sunday, February 08, 2009
http://www.foxnews.com/story/0,2933,489742,00.html

from PT2

WALLACE: The administration has come up with a plan for what's called TARP II, the second half of the financial rescue plan.
Instead of starting a government bad bank for toxic assets, you're going to offer incentives for private investors to buy up these securities. Do you really believe, regardless of the incentives you give, that the private market will pick up these assets?
SUMMERS: You know, it's been very interesting. We've received a whole variety of proposals from private investment firms, from private investors, for how private capital can be part of the solution to this problem.
It can't all be private capital. We can't just say, "Private sector, please invest," not given the size of the financial mess that we inherited.
But with the right kinds of government guarantees, with the right kinds of financing — you know, the type of thing that you've already seen is the actions that the Federal Reserve started taking some months ago to purchase mortgage-backed securities that have brought mortgages — brought mortgage rates down considerably.
With the right strategic approaches, Secretary Geithner believes that we can bring in substantial private capital, and that's something we all ought to be able to agree on, that where we can catalyze private capital, that's a better root to solving this problem than government resources.

http://www.bloomberg.com/apps/news?p...fL0&refer=home

Feb. 9 (Bloomberg)
Still outstanding is the issue Geithner’s predecessor failed to address: the illiquid assets that have caused the credit freeze. Officials continue to consider a so-called bad bank to buy them, perhaps in cooperation with private investors, such as hedge funds and private equity. It’s unclear how big a role there’ll be for federal guarantees of securities that remain on banks’ balance sheets.

[Slimprofits]

Re: Lawrence Summers on Fox News Sunday

from the WSJ this morning: Some critical elements remained unclear, including exactly how the government would entice investors to participate in the private bank, given that they can already buy soured assets on the open market if they want to. The government will likely offer some type of incentive, such as limiting the risk associated with buying the assets.

Investors would likely buy a stake in the entity, which would then buy mortgage-backed securities and other troubled assets.

The government would also be an investor, but the terms aren't yet decided. The entity might also raise funds by selling government-backed debt or through financing from the Fed, the people familiar with the matter said.

[..]

Having the FDIC guarantee a wider range of debt that banks issue to fund loans is also a likely element of the plan, said people familiar with the matter. The guarantees could help free up credit to both companies and consumers. Currently, the FDIC temporarily backs certain debt with a three-year maturity. Government officials could increase this to maturities up to 10 years.

[bill]

Re: Lawrence Summers on Fox News Sunday

from the WSJ this morning: Some critical elements remained unclear, including exactly how the government would entice investors to participate in the private bank, given that they can already buy soured assets on the open market if they want to. The government will likely offer some type of incentive, such as limiting the risk associated with buying the assets.

Investors would likely buy a stake in the entity, which would then buy mortgage-backed securities and other troubled assets.

The government would also be an investor, but the terms aren't yet decided. The entity might also raise funds by selling government-backed debt or through financing from the Fed, the people familiar with the matter said.

[..]

Having the FDIC guarantee a wider range of debt that banks issue to fund loans is also a likely element of the plan, said people familiar with the matter. The guarantees could help free up credit to both companies and consumers. Currently, the FDIC temporarily backs certain debt with a three-year maturity. Government officials could increase this to maturities up to 10 years.

Example of what’s coming.
http://www.latimes.com/business/la-f...,3188182.story

Sale of IndyMac banking unit is challenged by trustee




[COLOR=#333333! important]The trustee overseeing the liquidation of the Pasadena company seeks a court order forcing the FDIC to turn over documents and allow some employees to be questioned.[/COLOR]
Bloomberg News
January 14, 2009


The trustee overseeing the liquidation of IndyMac Bancorp Inc. is challenging the sale of the company's banking unit and seeking documents from the Federal Deposit Insurance Corp.

Alfred Siegel, trustee of the IndyMac estate, requested an order to force the FDIC to turn over papers related to the intended sale and produce some employees for questioning. In papers filed Monday in U.S. Bankruptcy Court in Los Angeles, Siegel said "certain of those assets may be property of the estate and, therefore, subject to the automatic stay."
Pasadena-based IndyMac was sold to a group of private-equity investors led by Steven Mnuchin of Dune Capital Management, the FDIC said Jan. 2. Details of the sale, expected to be completed by early February, haven't been disclosed, Siegel said.

"The limited documents currently in the trustee's possession raise serious concerns that the FDIC, as receiver for the bank, may possess assets of the debtor, and, therefore, the bankruptcy estate," lawyers for Siegel wrote.

http://blogs.wsj.com/deals/2009/01/0...-buying-banks/

January 5, 2009,
There is just one problem. These cheap assets are banks–and federal laws prohibit any company or investor except a bank from owning more than 10% to 24.9% of a deposit-taking bank. And yet, some buyout funds are proceeding, finding ways meant to comply with the letter–if not exactly the spirit–of the federal ownership laws.
The latest exhibit: This weekend, a group of seven private equity firms led by Dune Capital bought the carcass of failed Pasadena, Calif., mortgage lender IndyMac. The private-equity firms plan to rebuild it and use it as a platform to acquire other financial institutions, while overhauling IndyMac’s business model to steer clear of risky subprime mortgage loans. Because each of the firms are pitching in some money, no one firm owns more than 10% of IndyMac, thus appeasing federal regulators.