WASHINGTON–As banks look to clear toxic assets as part of the Treasury Department’s new program, a new question is rising over whether they will also be buyers.
The question is provoking plenty of hand-wringing, and the Treasury has yet to release the fine print on its Public-Private Investment Program. Andrew Williams, a Treasury spokesman, told American Banker, an affiliate of Credit Union Journal, that bankers will be allowed to buy assets under the program.
However, only healthy institutions need apply. "This is an open program designed to get markets going on these legacy mortgage related assets — it's between a bank and their supervisor whether they are healthy enough to acquire assets," Williams said.
Of course, how "healthy" will be defined is a big question, and government officials are not getting into that sort of detail just yet, American Banker noted. Suffice it to say, however, that the banking companies that have received repeated rescues – Citigroup Inc. and Bank of America Corp. – are not expected to be big buyers. It also appears a bank will not be able to bid on assets it is selling.
"Healthy banks will be able to participate on the investment side, not obviously on the assets you'd be selling," Federal Deposit Insurance Corp. Chairman Sheila Bair told bankers on a conference call last week to explain the loan side of this program. "We want to avoid conflicts."
