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Fallout: The Financial Crisis

Feds are hiring staff for the bailout

John Dimsdale Oct 8, 2008
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Fallout: The Financial Crisis

Feds are hiring staff for the bailout

John Dimsdale Oct 8, 2008
HTML EMBED:
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TEXT OF STORY
Kai Ryssdal: Treasury Secretary Henry Paulson gave a press conference today. He was talking about how the Department’s going to put the $700 billion bailout plan into action. The first couple of steps, though, have already been done.

The Treasury issued a call for applications from potential asset managers two days ago. Those are the folks who’re actually going to do the buying and selling of the bad securities Treasury’s going to take out of the market.

Our Washington Bureau Chief John Dimsdale reports the application deadline is today.

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John Dimsdale: Treasury’s request for applications warns that the asset portfolios to be bought and managed will be highly complex and could be worth several hundred billion dollars. Asset managers will have to identify bad loans and securities, negotiate the best possible price for taxpayers, take them over and run them conceivably for several years until market conditions improve and they can be sold.

So far, no firms have said they’re applying for the jobs, but a Treasury source says there’s been lots of interest. That’s no surprise to John Douglas, who took over failed savings and loans for the Resolution Trust Corporation 20 years ago.

John Douglas: Given the current environment, I think there will be plenty of people who will be interested.

Douglas says firms with expertise in managing real estate assets will jump at the government jobs. If for no other reason, they’ve got nothing else to do right now. Firms said to be interested include Blackrock, JP Morgan Chase and Morgan Stanley. Some on the list are the very firms that bought and sold shaky mortgage-backed assets to begin with. Douglas says Treasury will have to be on the lookout for two types of conflicts.

Douglas: One is the firms potentially involved in getting us into this mess. Second would be those firms that are involved in advising potential sellers how to deal with the government. You wouldn’t want those firms also advising the government on the buy side.

Treasury Secretary Paulson said today the department is working to resolve conflicts of interest as soon as possible, and the first bad mortgage assets will be purchased within weeks.

In Washington I’m John Dimsdale for Marketplace.

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