Obama Plan Seeks Buyers For High-Risk Assets

I actually hope this isn't as bad a plan as I (and Atrios, and Paul Krugman and numerous other economic bloggers -- Brad DeLong is in a distinct minority here) think it is. I really do, because the alternative is too upsetting to contemplate:

WASHINGTON — The Obama administration formally presented the latest step in its financial rescue package on Monday, an attempt to draw private investors into partnership with a new federal entity that could eventually buy up to $1 trillion in troubled assets that are weighing down the nation’s banks and clogging up the credit markets.

At least partly in anticipation of the program, which has been widely publicized, Asian and European markets were sharply higher. Index futures on Wall Street were also significantly higher.

Initially, a new Public-Private Investment Program will provide financing for $500 billion in purchasing power to buy those troubled or toxic assets — which the government refers to more diplomatically as legacy assets — with the potential of expanding later to as much as $1 trillion, according to a fact sheet issued by the Treasury Department.

At the core of the financing package will be $75 billion to $100 billion in capital from the existing financial bailout known as TARP, the Troubled Assets Relief Program, along with the share provided by private investors, which the government hopes will come to 5 percent or more. By leveraging this program through the Federal Deposit Insurance Corporation and the Federal Reserve, huge amounts of bad loans can be acquired.

The private investors would be subsidized, but could stand to lose their investments, while the taxpayers could share in prospective profits as the assets are eventually sold, the Treasury said. The administration said that it expected participation from pension funds to insurance companies and other long-term investors.

At least Obama's confident in it. For whatever that proves to be worth.

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