For Treasury Dept., Now Comes Hard Part of Bailout

IndigoMoon

By MARK LANDLER and EDMUND L. ANDREWS
WASHINGTON — It will be one of the world’s largest asset management firms with an impressive $700 billion war chest. Nothing short of the global economy depends on its success. And the Treasury Department has barely a month to get it up and running.

The bailout bill that President Bush quickly signed into law on Friday must do what financial experts have been unable to do for the last year — put a dollar value on mortgage-related assets that no one wants, move them off the books of ailing banks and unlock the frozen credit markets.

In signing the measure, Mr. Bush warned Americans not to expect instant results. “This will be done as expeditiously as possible, but it cannot be accomplished overnight. We’ll take the time necessary to design an effective program that achieves its objectives — and does not waste taxpayer dollars.”

Even after working feverishly over the last two weeks, the Treasury will not buy its first distressed asset from a bank for roughly six weeks, and almost certainly not until after the Nov. 4 elections.

Treasury officials do not plan to manage the mortgage assets on their own. Instead, they will outsource nearly all of the work to professionals, who will oversee huge portfolios of bonds and other securities for a management fee.

The Treasury is expected to name a senior official to supervise the program. For now, various working groups creating the program are reporting directly to Henry M. Paulson Jr., the Treasury secretary.

Mr. Paulson has recruited several former colleagues from Goldman Sachs to advise him, though administration officials took pains to say that they were not dominating the process, pointing to other Treasury employees who were playing major roles.

“We will move rapidly to implement the new authorities, but we will also move methodically,” Mr. Paulson said in a statement after the House passed the bill on Friday.

The government will hire only a bare-bones internal staff of about two dozen people with expertise in asset management, accounting and legal issues, according to administration officials, and will outsource the bulk of the program to 5 to 10 asset management firms.

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It sounds to me like the wolf is no longer guarding the hen house. Instead, he has taken up residence. Shocked

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DantesPeak

Having Goldman Sachs advise, and probably participate, in this plan appears to violate many ethics and conflict of interest rules. I don't know specifically whether or not part of the plan exempts these rules, but I haven't heard it does.

IN either case, it's a major blunder to allow something like this, as will cause great legal problems for the government later on.

It could have been accomplished like the RTC was operated, with experts hired from the outside to work within the government. Outside contractors are not bound by the many laws applicable to federal employees, and are much more difficult to investigate and prosecute.

Clearly those powers that created panic in Congress have won, just as they have caused panic before over these last 8 years.
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shady28 · Heavy Crude Joined: Jul 06, 2005 Posts: 369

Ferretlover

"For Treasury Dept., Now Comes Hard Part of Bailout:" trying to decide how to cover up what Cheney takes on the sly, and how to blow the rest on totally nonsensical pet projects.
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Minvaren

pedalling_faster · Intermediate Crude Joined: Dec 10, 2005 Posts: 941

it's basically a scam that may slow down economic collapse.

it's also part of a larger installment plan, composed of Fannie Freddie & other Fed infusions of cash this year. $700 billion is the amount initially put on it, though i think there is language that says, it could be more.

the best rumor i've heard about it is that it is related to fear that the US government may have trouble selling T-bills in the near future. so the money is going to the large banks that coincidentally buy most of the T-bills, to make sure that the US government can keep the illusion alive through 2009. that is, to make sure they don't have an un-attended auction.

i think the US government is more scared about not being able to borrow money, that about the Dow falling to 8000.
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