U.S. Government Hopes Private Capital Will Help Fund Bank Rescue

by FOREX on February 12, 2009

Will investors and funds want toxic assets in their portfolios?

One of the main issues affecting the economy, says the government, is that toxic assets remain on bank balance sheets to poison the outlook for many companies. In addition to floating ideas like a "bad bank", government leaders are back to the idea that investors and funds might help finance the bank rescue. Stock Market Funding reports on hopes for the bank rescue:

Administration officials said the plan, to be announced Tuesday, was likely to depend in part on the willingness of private investors other than banks — like hedge funds, private equity funds and perhaps even insurance companies — to buy the contaminating assets that wiped out the capital of many banks. The officials say they are counting on the profit motive to create a market for those assets. The government would guarantee a floor value, officials say, as a way to overcome investors’ reluctance to buy them.

It will be interesting to see whether this guaranteed floor value will be enough to overcome concerns about the nature of these toxic assets, and whether private money can help rescue banks — since trillions in public money hasn’t done the trick so far.

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