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Originally Posted by HappyTexan
Sag..the private investors the government has in mind are hedge funds and private equity firms. The very guys who lost from the derivative mess will stand to gain.
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I'm well aware of how the program is designed. It intends to involve in its necessary roles those who are available and competent to serve in those roles. Do you also object when the government uses mob insiders to serve as informants on other mob insiders, providing the former with cash payments, immunity on related charges, and then setting them up in cushy witness protection programs?
Quote:
Originally Posted by HappyTexan
These government backed investments won't be available to "Joe Mainstreet". The money still stays at the top  |
The idea is to create an initial market that is capable of serving as a pricing mechanism. If we assume that this goal will in fact be accomplished, how do you come to a conclusion that no means for broad access to that market will come about? There are a lot of assets that ultimatley need to be brought back into play. Typically, more players would be seen as an advantage in such a scenario.
Quote:
Originally Posted by HappyTexan
Since this was announced banks have started driving the price up to about $.50 on the dollar as they accumulate this paper so they can participate in the program and get government money to back up the junk bonds.
snippet:
To entice private investors like hedge funds and private equity firms to take part, the F.D.I.C. will provide nonrecourse loans — that is, loans that are secured only by the value of the mortgage assets being bought — worth up to 85 percent of the value of a portfolio of troubled assets.
Risk-taking institutional investors, like hedge funds and private equity funds, have refused to pay more than about 30 cents on the dollar for many bundles of mortgages, even if most of the borrowers are still current. But banks holding those mortgages, not wanting to book huge losses on their holdings, have often refused to sell for less than 60 cents on the dollar.
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So, what you are saying is that the program is already showing signs of success. Frozen markets are showing signs of beginning to thaw out. Willing buyers and willing sellers are starting to come together with transactions between them occurring at market-based prices. Interesting.
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