DealZone

Whither troubled assets in TARP?

November 11, 2008

Will the U.S. government use its Troubled Asset Relief Program to actually buy troubled assets?

The $700 billion program was pitched as an emergency measure to take bad assets off the books of financial institutions to unclog credit markets.

But so far, the Treasury has used the money on other ways to promote lending – $250 billion of planned capital injections into banks, including supporting acquisitions of weak institutions, and a $40 billion equity investment in AIG as part of the revised bailout for the troubled insurer. As part of the AIG rescue package, the government also agreed to set up two vehicles to buy assets that are leading to a cash drain on AIG.

That does leave a lot of companies that were hoping to sell distressed assets to TARP out in the cold.

The idea that TARP is going to come in and be a major buyer of assets is fading, but several companies are still waiting to see if the government will come in as that would mean there are more buyers for the assets, Lazard investment banker Gary Parr said at the Reuters Global Finance Summit.

But will the waiting pay off and TARP money used to buy of distressed assets?

Parr was hopeful: “I think it will be.”

“In a sense the government stepped into assets today in the AIG deal by backing two pools,” Parr said on Monday.

“There is an example. It is not obvious way, where the headline is, ‘Aha, TARP is a buyer of assets.’ But actually the government is stepping in and taking real risks on assets. That is what TARP envisaged.”

(Photo credit: Reuters)

Comments
11 comments so far | RSS Comments RSS

If I’m not mistaken, AIG administers alot of military & government pensions. What would happen to those pensions if AIG went under? Happy Veterans Day!

 

So one would think that when the Treasury dept.helped out
Wells Fargo last month that they in turn would try to help out troubled homeowners. Not so, in fact they will not even attempt to work with you to forestall foreclosure proceedings. Nice to see our tax dollars working for “We The People”.

Posted by Cynthia | Report as abusive
 

Why don’t they liquidate all the CEO’S that made a killing off of this mess??

Posted by lucy | Report as abusive
 

I guess I will join the millions of Americans ready to march on Wall Street and assassinate these idiots.

Posted by Richard | Report as abusive
 

Hello
Just read the story and got to thinking. All us tax payers should get stock sertificas for the money we are putting in to AIG. Have fun, Rick

Posted by Rickrh72 | Report as abusive
 

The government is spending money unwisely, and on programs it said it would not!? Color me not-at-all-surprised.

 

Credit Default Swap Scam 101.

Players: Insurance Company, Buyers of insurance, Some Event, Taxpayers

Buyers pay $10 billion and gets $100 billion from Insurance Company if Some Event Happens. Insurance Company goes bust. Event happens. Buyer of lucrative insurance contract wants to get paid. Cries to DC. DC buys these contracts. THERE IS NO ASSET. THERE IS ONLY PAYING THE INSURANCE CONTRACT. The taxpayer gets NOTHING and pays to rich Insurance holder. The original $10 billion premium already paid the insurance companies CEO salary and lavish lifestyle.

That is the SCAM.

Same as betting in Vegas. Pay $25. In case something happens you either get nothing or get say $100. This “contract” is otherwise known as a “bet.”

Posted by Seer | Report as abusive
 

Bush’s legacy is still alive and destroying the nation!

Posted by Davis | Report as abusive
 

Davis,

This should not be associated with Bush’s legacy. While Clinton was in office these programs/loan policies were green lighted. It took about 8 years for the ARM loans to finally hit the buyer and it just happened while Bush was in office. Research is required before showing your ignorance

Posted by Bill | Report as abusive
 

I gotta say my opinion; ok uncle Sam don’t want to buy troubled homes because is down right “Risky”…at the end if that was to happened I get to stay in my home (yes I’m in it too) i will stay in it for at least 10 years unlike the stock exchange markets…how is that risky?

so is not risky in Instead go ahead and invest in companies that should be seeking protection from the bankruptcy courts (I worked for an airline who did it for none other than 5 times & every time I lost my job) but guess what I got called back every time and the company is still alive. Uncle Sam did not come rescue them!

Keep putting a parachute in the inevitable, let these companies restructure, get rid of bad debt and contracts and start from scratch. Accommodate to todays markets.
ex FORD: you crated the first car, get more innovative ideas and focus; give me something that adjusts to todays markets,(fuel Economy, reliability & longevity) and I’ll buy your cars.

Posted by pete | Report as abusive
 

Bill,
Davis is close to the truth. Bush could have instituted regulations on Wall Street, but chose to remain a free market kind of president. After all it was Phil Gramm (R) TX whose bill removed regulations and caused not only this but also Enron. Have a wonderful life.

Posted by Marty | Report as abusive
 

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