Investors Eye Plan's Bad Assets

Private investors are interested in purchasing highly illiquid mortgage assets from banks and other financial institutions with the aid of long-term government financing, according to Treasury Department officials. There is "tremendous interest" in purchasing these assets but currently the investors can only secure short-term financing, a Treasury official told reporters. Providing longer-term financing will make it more "comfortable" for them to buy and hold these assets, he said. Treasury secretary Timothy Geithner said the Obama administration is willing to put up $500 billion in financing capacity and possibly expand it to $1 trillion if this private/public partnership program is successful in cleansing banks of bad assets. It is one part of the administration's plan to stabilize the financial system and increase the flow of credit. Treasury officials are still working on the structure of these partnerships, which would allow the government to share in the upside, if the investors make an attractive return. Treasury is not planning to shield investors from losses through insurance or guarantees - at least initially. "The program will evolve," the Treasury official said. But that is "not our intent at the moment."