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Private equity firms invest in bad assets

John Dimsdale Mar 31, 2009
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Private equity firms invest in bad assets

John Dimsdale Mar 31, 2009
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Kai Ryssdal: There was a hint of promise in the banking sector today. Signs that the government’s plan to get private investors buying bad assets might actually be working. That, as you might remember, is the crux of the Treasury secretary’s proposal to get the financial industry back on track. Our Washington bureau chief John Dimsdale reports that at least two private equity firms are betting troubled mortgages and bad credit-card debts are worth investing in.


JOHN DIMSDALE: Colony Capital is a real estate private equity firm that got its start buying shaky bank assets during the savings and loan crisis 20 years ago.

THOMAS BARRACK: Distressed assets are really the food that gave us birth.

Colony Capital’s chairman is Thomas Barrack. He says with the government guaranteeing much of the financing, it’s time for private investors to take on some of the risks.

BARRACK: It’s a moment where we need to focus on outcome, perhaps a little more than income.

And it’s not just real-estate assets attracting private money. Bill Bartman, who also made a fortune during the S&L collapse, is forming a private equity fund to invest in bad credit-card debts.

BILL BARTMAN: My humble opinion is anybody above room temperature IQ should be recognizing what they’re seeing in front of them. Tremendous bargains for those who have the capacity to service delinquent debt.

That means collecting payments from dead-beat borrowers or finding new uses for foreclosed properties. And with the government’s help, he says, investors only need a few cents return on a dollar invested to make a profit.

In Washington, I’m John Dimsdale for Marketplace.

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