Jim,
In the same day of the announcement to buy one trillion OTC derivatives from the banks, they are already asking for more than one trillion.
CIGA BJS
Dear CIGA BJS
See the Krugman comments earlier. The problem globally is over one quadrillion. Sure they need more money.
Regards,
Jim
Toxic asset mountain looms over Treasury plan
PPIP may need to at least double in size to tackle troubled loans, securities
By Alistair Barr, MarketWatch
Last update: 5:29 p.m. EDT March 23, 2009
SAN FRANCISCO (MarketWatch) — The Treasury Department’s latest plan to stabilize the financial system targets a formidable mountain of troubled loans and mortgage securities from the real estate boom earlier this decade. Some experts said Monday that more money may be needed to complete the arduous climb.
Between $75 billion and $100 billion of Treasury money will be funneled into the so-called Public-Private Investment Program, or PPIP. Private investors will buy troubled assets alongside the Treasury and will get access to government loans and guarantees, generating $500 billion to purchase toxic assets. It could be expanded to $1 trillion later, Treasury said Monday. See full story.
"Purchasing $1 trillion in toxic assets won’t be enough to solve the banking system’s problems; the program probably needs to be at least twice as large," said Mark Zandi, chief economist at Moody’s Economy.com.
The first half of the plan focuses on loans sitting on bank balance sheets. U.S. banks may be holding as much as $2.5 trillion of toxic assets that haven’t been written down yet, Zandi estimated.
"To cover losses on these assets, the government will ultimately need an additional $300 billion to $400 billion," he added. "The up to $100 billion that officials plan to commit now is a good start, but they will eventually have to ask Congress for more."
The other part of Treasury’s plan targets mainly non-agency residential mortgage-backed securities (those issued by private firms rather than government agencies like Fannie Mae and Freddie Mac) and commercial mortgage-backed securities.
The Legacy Securities Program, as it is known, will incorporate the Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF. Investors will get TALF loans to help them buy non-agency residential MBS that were originally rated AAA. Commercial MBS and other asset-backed securities still rated AAA will also be eligible, Treasury said.
