WSJ: Banks lobby to be able to buy up their own securities in the PPIP auctions later this summer

[Aloha Spirit]

Originally posted in WSJ, here's a link to the full piece though since WSJ requires a subscription...
http://www.michaelmoore.com/words/latestnews/index.php?id=13955

Some banks are prodding the government to let them use public money to help buy troubled assets from the banks themselves.

Banking trade groups are lobbying the Federal Deposit Insurance Corp. for permission to bid on the same assets that the banks would put up for sale as part of the government's Public Private Investment Program.
...
Allowing banks to have it both ways would give them added incentive to sell assets at low prices, even at a loss, the banks contend. They claim it also would free up capital by moving the assets off balance sheets, spurring more lending. "Banks may be more willing to accept a lower initial price if they and their shareholders have a meaningful opportunity to share in the upside," Norman R. Nelson, general counsel of the Clearing House Association LLC, wrote in a letter to the FDIC last month.

Even supporters of letting banks buy their own loans said it could be a tough sell. "A bank bidding on its own assets really has the potential to look awful in the public's mind," said Mark J. Tenhundfeld, an American Bankers Association lobbyist.

Ya, bidding in your own auction has the *potential* to look bad.
Analogy, analogy, let me think.

This plan is like a second rate artist placing a million dollar winning bid on her own "derivative" painting in order to make her "stock" in the art world rise.


Posted because I got the feeling DU was running low on outrage ;-)

[DJ13]

1. Bair Says Banks Can’t Buy Own Assets in PPIP Auction

May 27 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair said banks involved in the U.S. Public- Private Investment Program won’t be permitted to buy their own impaired assets as a way to cleanse their balance sheets.

“There should be no confusion: Banks will not be able to bid on their own assets,” Bair said today at a Washington news briefing to discuss first-quarter U.S. bank earnings. There is “no structure” for such purchases, she said.

The FDIC is helping the Treasury Department set up and run the PPIP, which will use $75 billion to $100 billion of Troubled Asset Relief Program funds to help private investors buy as much as $1 trillion in mortgage-backed securities and other holdings.

Industry groups such as the Clearing House Association LLC, which includes JPMorgan Chase & Co. and Bank of America Corp. among its 10 members, are pressing the FDIC to let lenders buy their own assets, the Wall Street Journal reported today.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_cSJOgFLwPs&refer=worldwide

[Aloha Spirit]

2. Thanks DJ13

Looks like they might be able to bid still though, on other banks' assets.
I hope they don't allow this.
The whole idea of the PPIP is not that the auctions take off all the toxic assets, but that they spur a market for such assets.
If banks can bid on other banks assets, they will be shaping the market which goes against the whole notion of discovering what the assets are worth,... at least, that's how I understand it.

[high density]

3. Can't buy their own toxic assets. What about the toxic assets of other banks?

I would hope that a bank that is selling toxic assets is banned completely from buying any toxic assets, their own or otherwise, under this program.

Bair didn’t say whether banks will be allowed to buy assets from other banks.

[snowdays]

4. As Durbin said today---Banks are in charge. They ask, they recieve.

[Aloha Spirit]

5. The FDIC and Congress are not the same thing,

Durbin was referring to Congress.

And his statement was made 4 weeks ago, not today.

If the FDIC does not allow banks to bid in the auctions, would you agree that the banks don't own the FDIC?

[snowdays]

6. I did not mention Congress. But the banks are in charge.

[Aloha Spirit]

7. If you did not mean to refer to Congress, then your reference to Durbin was not appropriate

as he was referring to Congress.

[snowdays]

8. I said it in the spirit of his words. Nick picking is not attactive.

[Aloha Spirit]

9. I just ask for accuracy. Knowing the context of his quote would make you be able to quote

him more effectively.
I trust you do not know that context since you did not know when he made the statement.
It's "nit picking" btw.
Not trying to start anything, but your statement that banks are in charge by itself means very little without referring to something in particular.
For example, I would agree that banks are in charge of banks, but not that they are in charge of NASA or the UN.
The more specificity and accuracy you can include in a message, the more meaningful it will be, and the more meaningful our debate could be.
Thanks

[snowdays]

10. I liked his short version. End of discussion.

[Aloha Spirit]

11. So in other words, your message was not related to my post at all

??