Evidently toxic assets aren't so toxic when Uncle Sam is picking up part of the cost, as banks are apparently lobbying hard to get in on both sides of the Treasury's Public Private Investment Program, or PPIP.
Trade groups for the banking sector are pressing the Federal Deposit Insurance Corp. to grant the go-ahead for banks to bid on the same residential and commercial mortgage-backed assets the government is urging them to sell through the PPIP, according to a report in
The Wall Street Journal.
The FDIC hasn't made a decision on the matter yet, but Treasury and the White House are sure to be thinking about how it's going to look if banks are potentially bidding on their own assets using government money as leverage. The Troubled Asset Relief Program that pumped billions into the banks last year is already seen as a boondoggle. Regulators are likely to be loath to allow something that can be presented as a back-door method of letting the banks negotiate with themselves to buy back their own assets using taxpayer funds.
However, letting the banks be both buyers and sellers could also help overcome the PPIP's chief problem: finding institutions willing to part with their assets -- toxic or otherwise -- at the steep discount the bottom of the market now demands. J.P. Morgan Chase & Co.'s (NYSE:JPM) CEO Jamie Dimon has already come out and said his bank won't participate, while big bailout recipients Bank of America Corp. (NYSE:BAC) and Citigroup Inc. (NYSE:C) are taking a wait and see approach. -
George White See WSJ story See Dealscape post BofA and CitigroupSee Dealscape post on J.P. Morgan
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