Fallout: The Financial Crisis

A toxic assets deal for big investors

Steve Henn Apr 9, 2009
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Fallout: The Financial Crisis

A toxic assets deal for big investors

Steve Henn Apr 9, 2009
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TEXT OF STORY

Steve Chiotakis: The Treasury Department is looking for some good investors. People who want to help reverse the fallout of America’s financial crisis. The New York Times reports there’s a plan in the works that would allow people to invest in funds set up to buy toxic assets from banks. Just how all this might work is still unclear and the plan is loaded with risk. Here’s Marketplace Steve Henn.


Steve Henn: There is no question that the government is offering big private investors a pretty sweet deal if they agree to buy up troubled assets from U.S. banks. Potential investors get to borrow most of the money they put up from the feds, and if their bets go badly they don’t have to pay those loans back.

Marc Cliffe is chief economist at ING. He says if all goes well, some of the biggest firms on Wall Street stand to make a killing.

Marc Cliffe: Exactly, so it doesn’t take too much imagination to see the potential political consequences if these investors make huge profits.

The scale of those profits might make AIG’s bonuses look piddling. So some on Wall Street and in Washington have suggested letting thousands of small investors in on the deal, too. But there would be risks:

The fact is the program still holds the potential for the investments to be completely wiped out.

And just imagine for a second how that would play on Main Street and in Congress.

In Washington, I’m Steve Henn for Marketplace.

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