Analysis of TALF Program From POV of Institutional Investors

[haha]

http://www.mwamllc.com/pdf/MetWest_TALF_040109.pdf

Russian Friends of Putin didn't get treated any better than this.

Ha

[clifp]

Man that is a sweet deal. 20% cash on cash return, plus potential for capital gains, and Uncle Sam takes 90% of the risk and only gets 50% of the profits.

Where do I sign up? I want to be institutional investors. I Uncle Sam a rich bankers best friend.

[FIRE'd@51]

Quote:

Originally Posted by clifp Man that is a sweet deal. 20% cash on cash return, plus potential for capital gains, and Uncle Sam takes 90% of the risk and only gets 50% of the profits. Where do I sign up? I want to be institutional investors. I Uncle Sam a rich bankers best friend.

Your wish may soon be granted.

U.S. May Enlist Small Investors in Bank Bailout

[Independent]

If the gov't is going to do something like this, it certainly makes sense to try to get small investors involved. However, note that in any mutual fund it's possible that the real winners are the fund managers, not the investors. In this case, the management is especially critical (we keep hearing that nobody really knows what these assets are worth). Note, too, that it's very possible for investors to lose 100% of their principle in this program - good management needs to find ways to diversify risks, and that may be hard.

[ziggy29]

If this is really the sweetheart deal that's being purported, they should strive to inject some of the action into our 201Ks. Maybe we could get a little of it back and make it a 301K eventually.

[jdw_fire]

so what is to prevent citigroup (for example) from setting up a company for the sole purpose of aquiring citigroups toxic assets, funding said company with an amount equal to 5-16% of the face amount of the citigroup toxic assets, then have that company borrow the other 84-95% of the face amount of the citigroup toxic assets from the US gov and then have that company pay citigroup 100% of the face amount of the citigroup toxic assets for citigroups toxic assets. this would let citigroup have their cake and eat it too as the net result would be that citigroup would get paid 84-95 cents on the dollar for their toxic assets and this new company (which citigroup would own) gets most of the cash flow from the citigroup toxic assets plus is in a position to collect even more equity if there arent many defaults of said toxic assets, all while sticking the US gov (taxpayer) with all the risk. seems like the banks can really use this program to be made more than whole, all at the taxpayers expense!

[Gumby]

It is my understanding that the big banks are actually buying toxic assets on the secondary market in anticipation of just such a scenario.

[Gumby]

More commentary on jdw-fire's scenario
Krugman vs. Sachs on PPIP Loopholes -- Seeking Alpha

[jdw_fire]

Quote:

Originally Posted by Gumby More commentary on jdw-fire's scenario Krugman vs. Sachs on PPIP Loopholes -- Seeking Alpha

i had not seen this however i laughed out loud as i read it and saw that they even used the same bank as an example. i am glad i am not the only 1 to have thought of it and hopefully our government will do something to prevent this from happening, however if i could come up with that scenerio in just a few minutes of thinking about it, someone else should be able to come up with something that does something similar but is much better hidden and alas i think the banks will find a way to exploit this gov program and us taxpayers will be screwed in the end.

[Independent]

It's not quite as bad as it sounds. This is from the "Term Sheet"

Quote:

A Fund Manager may not, directly or indirectly, acquire Eligible Assets from or sell Eligible Assets to its affiliates, any other Fund or any private investor that has committed 10% or more of the aggregate private capital raised by the Fund. Private investors may not be informed of potential acquisitions of specific Eligible Assets prior to acquisition.

http://www.treas.gov/press/releases/...ties_terms.pdf

PPIP: Bad, Maybe, But Not THAT bad ~ Angry Bear

But, of course, when there is this much money on the table and being spent this quickly, I'm sure that someone will come up with a game.

I think there are better ways to deal with the "troubled assets" - I suggested "trickle up instead of trickle down" before.

[jdw_fire]

and now that the mark to market rules have changed are those assets really all that troubled?

[jdw_fire]

Quote:

Originally Posted by Independent It's not quite as bad as it sounds. This is from the "Term Sheet" http://www.treas.gov/press/releases/...ties_terms.pdf PPIP: Bad, Maybe, But Not THAT bad ~ Angry Bear But, of course, when there is this much money on the table and being spent this quickly, I'm sure that someone will come up with a game. I think there are better ways to deal with the "troubled assets" - I suggested "trickle up instead of trickle down" before.

for more ways to game the system read the comments in the link that Gumby posted