The U.S. Treasury Dept. keeps trying to figure out a way to cleanse the banking sector of its toxic assets, but the latest iteration of its Legacy Securities Public-Private Investment Program didn’t elicit much excitement outside of the media relations departments of the nine fund managers named to participate in the first round of the effort.
“It will be easier to raise money than purchase assets or figure out how to sell those assets without seriously impacting balance sheets,” says Kevin Petrasic, of counsel at the banking and financial institution practice of international law firm Paul Hastings. “We have to conclude that the biggest problem will be trying to find a willing seller. I would suspect that there are plenty of willing investors,” he adds.
The funds have up to 12 weeks from the day of the announcement (July 8) to raise capital, and Petrasic believes that quite a bit of that money is probably already in hand. With all this work on the part of Treasury, government officials presumably are convinced there are some banks ready to sell.
As for the delayed Federal Deposit Insurance Corp.’s Legacy Asset Program, the FDIC now says it plans to test the program sometime this month. It’s unclear how big the solicitation will be, and Petrasic doesn’t expect the agency to “start purchasing loans anytime soon.”
