As Equity Sees It

Chuck Hagel, who retired from the Senate last month, said the latest incarnation of the federal bailout plan is not perfect but is "moving in the right direction."The former Republican senator from Nebraska, quickly added, "The devil is in the details."

Mr. Hagel, who spent 12 years on the Senate Banking Committee, has some fresh perspective on the issue, given his new perch at Corsair Capital LLC, a New York private-equity firm specializing in financial services. He joined Corsair's board this week as a managing adviser.

In an interview Wednesday, Mr. Hagel said that the government is right in trying to jump-start the banking system, and that it is going to need help from the private sector. "The fact is the government is limited in its ability to deal with this problem."

He also said the Treasury Department needs to clarify how it would structure, oversee, and offer incentives on the plan.

Seasoned private-equity participants have been more specific in their criticism.

Mani Sadeghi, the managing partner of Equifin Capital Partners LLC in New York, said it fails to address two key questions: What assets would be up for sale, and who would value them?

His firm would have little interest in purchasing troubled bank assets if the government were setting the price, he said. "That's a private-sector activity. You want to make sure that the price is a market price and not a subsidized price."

It is also not clear what infrastructure would be in place to service mortgages, car loans, or other kinds of assets once they were removed from bank books, he said.

Howard Newman, the president and chief executive officer of Pine Brook Road Partners LLC in New York, said the government needs to spell out exactly how it wants private equity to aid the banking industry.

"The government needs to make it clear what risks private capital is being asked to assume," Mr. Newman said. "Liquidity risk? The solvency risk? The credit risk?"

Nick Paumgarten, Corsair's founder and chairman, said Mr. Hagel's duties are still being worked out. He could be involved in "sourcing deals … or helping us think through regulatory changes."

Mr. Paumgarten said he has been looking for an adviser with Washington roots since losing the counsel of Roger W. Ferguson Jr., the former Federal Reserve Board vice chairman, who left Corsair's board last year to take the helm of the Teachers Insurance and Annuity Association.

Having allies in Washington is critical, Mr. Paumgarten said. Corsair is paying closing attention to the government's efforts to entice private investors into the banking industry, but "we're not jumping into the market."

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