03 Mar 2009
March 3 (Bloomberg) -- The Obama administration may create investment funds to purchase loans and other distressed assets, the Wall Street Journal reported, citing people familiar with the matter.Managers of the funds would have to invest some of their own capital, along with government money, and would share in any profit or loss, the report said. No decision has been made on the final structure of this financing partnership, it said.
Treasury Secretary Timothy Geithner in February outlined the Public-Private Investment Fund, with an initial capacity of $500 billion that could grow to $1 trillion, to provide financing for private investors to buy distressed securities. The plan aims to clean up banks' toxic assets, seeking to end the credit crunch hobbling the economy.
The government would contribute money from the $700 billion bank bailout package announced last month, with additional financing likely coming from the Federal Reserve and by selling government-backed debt, the Journal said. The government may offer non-recourse loans to minimize risk for private investors and encourage participation, the report said.
The Fed and the Obama administration also are mulling whether to expand the Term Asset Backed Lending Facility to existing distressed assets, the paper said. Such a move may include providing low-interest loans to investors buying distressed mortgage-backed securities or commercial real-estate loans, the report said.
No decision has been made on the final structure of this private-public financing partnership, the Journal said.
