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Treasury Dials Back Plan to Aid Banks
Less Help to Investors Buying Toxic Assets

Nine private firms have been selected to partner with the government and run the investment funds that will purchase toxic assets. These include a subsidiary of General Electric, one of the largest recipients of federal aid, and BlackRock, which the government already has tapped for several other roles.

The fund managers have to put in $20 million of their own money and each raise at least $500 million over the next 12 weeks. At that point, the program can finally begin.

The other firms selected by the Treasury are AllianceBernstein, Invesco, Marathon Asset Management, Oaktree Capital Management, RLJ Western Asset Management, TCW Group and Wellington Management. GE Capital Real Estate will participate as a joint venture with Angelo, Gordon & Co. These firms will partner with 10 small minority-owned and woman-owned financial services business, Treasury officials said.

Buying toxic assets was of paramount importance to government officials last fall when Congress approved the $700 billion bailout, dubbed the Troubled Assets Relief Program. But weeks after the measure became law, the Treasury decided to use most of the first installment of those funds to inject capital directly into banks. Once President Obama was sworn into office, Treasury officials again urged that buying toxic assets remained critical.

Separate from the securities derived from troubled loans, there are trillions of dollars in distressed residential and commercial mortgages on the balance sheets of banks, industry analysts said. But an effort led by the Federal Deposit Insurance Corp. to buy these loans was shelved last month because of a lack of interest from buyers and sellers.

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/08/AR2009070803012.html?hpid=topnews