Monday, March 23, 2009

The Real Bush Legacy Project

Today Tim Geithner gave the details of the US Treasury Public-Private Partnership approach to bad banking system assets. It continues to bear some resemblance to the Swiss StabFund, although in the Swiss case, the private partner is the incumbent bank (UBS). Interesting fact: the US Fed helped finance the Swiss plan. Anyway, to help mere mortals understand it, the press release includes examples --

Step 4: The fund manager commences the sales process for the investment fund and is able to raise $100 of private capital for the fund. Treasury provides $100 equity co-investment on a side-by-side basis with private capital and will provide a $100 loan to the Public-Private Investment Fund. Treasury will also consider requests from the fund manager for an additional loan of up to $100 to the fund.
Step 5: As a result, the fund manager has $300 (or, in some cases, up to $400) in total capital and commences a purchase program for targeted securities.


Is it possible that the actual draft of the original plan is just exactly as above, except with 9 more zeroes attached to all the numbers?

UPDATE: Paul Krugman shows that things get more interesting when you attach probabilities to the numbers.

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