Thursday, February 26, 2009
Government financing and guarantees for illiquid mortgage-backed junk
Timothy Geithner is putting the finishing touches on a plan that will dump $1 trillion of toxic assets onto the US taxpayer. The plan, which goes by the opaque moniker the "Public-Private Investment Fund" (PPIF), is designed to provide lavish incentives to hedge funds and private equity firms to purchase bad assets from failing banks. It is a sweetheart deal that provides government financing and guarantees for illiquid mortgage-backed junk for which there is currently no active market. What's got Geithner worried, is the fear that the public will see through this latest boondoggle and set off a political firestorm. If that happens, the markets will go into a swan-dive and Geithner's career at Treasury will come to an abrubt end. ~~~~~ meanwhile Darling does a weasel.