Treasury buying toxic assets "at discount"

A

ASusilovic

The Obama administration's eagerly-awaited bank rescue plan will offer to insure some distressed assets held by banks, authorize the government to purchase others, and spend up to $100 billion to buy and modify troubled homeowner mortgages, a source with knowledge of the plan told Reuters on Friday.

U.S. Treasury Secretary Timothy Geithner will detail how the administration plans to use the funds remaining in the government's $700 billion financial bailout program in a speech scheduled for 12.30 p.m. on Monday.

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However, a source told Reuters that Treasury will buy the assets at a discount, not at the assets' "carrying value" that the banks have on their balance sheets.

http://www.reuters.com/article/newsOne/idUSTRE5160AM20090207
 
Well weeks ago we had Soros saying it would be 1 trillion. Next day it was 1-2 trillion. Then by the end of the week, it was up to 4 trillion. Then Obama came out and got tough on Wall Street, the multi-trillion talk went away and some bank stocks began to fall.

Now they say 500 billion. How could they not get a discount?

And this talk of suspending mark to market. There is a small inconsistency. If there is no mark to market and the Treasury buys some. Instantly there is a market, there is a price, be it inflated or not. It is a market, and Paulson ran from it.

Also what about Geitner's stress test? Some of the banks may not pass with flying colors.
 
WASHINGTON – Treasury Secretary Timothy Geithner is considering a plan to help purge banks of their bad bets by partnering with the private sector to buy troubled assets, according to people familiar with the matter.

The so-called "aggregator bank" would be seeded with some money from the $700 billion financial-sector bailout fund, but most of the financing would come from the private sector. Private firms would purchase mortgage-backed securities and other troubled assets and could reap the benefits if those assets eventually rise in value.

The idea is not yet certain to be included in the final plan, but appears to be a leading solution to a central problem: how does the government rid the financial system of its toxic assets.

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Mr. Geithner is set to unveil the Obama administration's financial-rescue plan this week. He was expected to give a speech Monday on his plans, but the administration is discussing bumping his remarks speech to Tuesday so the Treasury Secretary can focus on the stimulus bill moving through Congress, according to a person familiar with the matter...


Mr. Geithner met with U.S. House Democrats Saturday at their three-day policy retreat in Williamsburg, Va., and told them the U.S. financial system remains "badly damaged," said Rep. Brad Miller, a Democrat from North Carolina and a member of the House Financial Services Committee. "He said it's clearly going to get worse but we have to act to prevent it from getting much worse," Mr. Miller said.

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The speech made it clear, Mr. Miller said, that the financial system remains fragile. "If we had regulators go in an examine the books like we did at Fannie Mae and Freddie Mac a great number of our systemically important financial institutions could be insolvent."


http://online.wsj.com/article/SB123404707960860295.html

They have no plan.
 
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