Toxic Assets

WASHINGTON - President Obama said yesterday he will seek new powers that would allow his administration to seize troubled companies such as the insurer AIG - and take ownership of their toxic assets - if their collapse would threaten the financial system. Obama said his administration will fast-track new financial industry oversight that includes a "resolution authority" that would have powers similar to those of the Federal Deposit Insurance Corp., which can seize control of banks, take over their bad assets, and sell the good ones to competitors.

As their losses from mortgages grow, Spanish banks have begun discussions about creating a separate entity — a "bad bank" — to take on these assets and relieve pressure on the financial sector. The goal of the new organization would be to reduce the financial strain on banks and prevent the need for either a more costly government bailout or an international rescue along the lines of Greece, Portugal and Ireland. The urgency of the issue was highlighted by ratings agency Standard & Poor's, which downgraded the debt of 11 Spanish banks — including Banco Santander SA, the...

WASHINGTON - The Treasury Department said yesterday that another large investment company has raised sufficient capital to join the government in buying toxic bank assets, a strategy that’s designed to help spur more normal lending. Marathon Asset Management LP raised the $500 million minimum to begin operations. It was the eighth group to qualify. With the addition of New York-based Marathon, the selected companies have raised $5.07 billion, which the Treasury Department has matched dollar for dollar, using resources from the $700 billion bailout program.

The Federal Reserve Bank of New York says it has sold a portion of the toxic mortgage securities it assumed in 2008 from American International Group as part of the massive taxpayer bailout of the big insurer. The buyers are Barclays Capital and Deutsche Bank, which won in competitive bidding, the New York Fed announced Thursday. It said the securities were sold at a "desirable" price that maximizes recovery for taxpayers. But it said it won't disclose that price until July. New York Fed President William Dudley said the price "significantly exceeds" what the Fed paid for them.

A $29 billion federal program to let banks sell toxic assets to hedge funds has been profitable so far for taxpayers, but it is not working out so well for the Boston investment firm Wellington Management, according to the Department of the Treasury. Wellington posted a negative return of 4.7 percent since October 2009, the only one out of eight firms in the program that has yet to produce a positive return, according to a year-end report from the Treasury. Others have posted double-digit gains, including Atlanta-based Invesco and Oaktree Capital Management of Los Angeles.

Toxic assets, anyone? The Obama administration's plan to help banks unload soured mortgage assets isn't just an opportunity for Wall Street. Individual investors may be able to get in on the action - if they've got a stomach for plenty of risk. At least three mutual fund companies have already expressed interest in buying toxic assets and giving fund clients a chance to invest. "We are intrigued by the potential double-digit returns . . . " said Bill Gross, a founder of Pimco, manager of the world's largest bond fund.

WASHINGTON - The Federal Deposit Insurance Corp. yesterday named the first winning bidder under a test of the government’s program to back private purchases of toxic mortgage assets and get them off banks’ balance sheets. Texas-based Residential Credit Solutions Inc. is paying $64.2 million for a 50 percent stake in a new company that will have about $1.3 billion in home mortgages from the failed Franklin Bank of Houston, which the FDIC took over in November. The new company will issue a note for $727.8 million to the FDIC.

HARTFORD - Connecticut Attorney General Richard Blumenthal said yesterday that he is investigating why a $1 trillion government bailout program designed to unfreeze the credit markets steers money to Moody's, Fitch, and Standard & Poor's and shuts out their six smaller competitors. He said the companies may have violated antitrust laws, and he alleged they overrated toxic assets before the meltdown. Blumenthal said he subpoenaed the companies for documents last week and asked Federal Reserve chairman Ben Bernanke to revise the bailout program to stop favoring the three rating...

WASHINGTON - Treasury Secretary Timothy Geithner defended his approach to fixing the country's economic mess yesterday, saying "the market will not solve this" while disclosing a bailout fund for battered banks has $135 billion left and might need more. Geithner used his first Sunday talk show appearances to promote President Obama's massive government spending plan to ease credit, help borrowers, and inject billions of dollars into the financial sector. Long kept behind the scenes, the treasury secretary has emerged as the administration's champion of a plan that fueled an uptick...

WASHINGTON - The Obama administration's latest attempt to tackle the banking crisis and get loans flowing to families and businesses would create a new government entity, the Public-Private Investment Program, to help purchase as much as $1 trillion in toxic assets on banks' books. The new effort, to be unveiled today, will be followed tomorrow with the administration's broad framework for overhauling the financial system to ensure the current crisis - the worst in seven decades - is not repeated.

A $29 billion federal program to let banks sell toxic assets to hedge funds has been profitable so far for taxpayers, but it is not working out so well for the Boston investment firm Wellington Management, according to the Department of the Treasury. Wellington posted a negative return of 4.7 percent since October 2009, the only one out of eight firms in the program that has yet to produce a positive return, according to a year-end report from the Treasury. Others have posted double-digit gains, including Atlanta-based Invesco and Oaktree Capital Management of Los Angeles.

Spanish banks must raise an additional euro50 billion ($65.5 billion) to cover their exposure to toxic real estate loans and assets accumulated during a construction boom that went bust with the financial crisis, according to new regulations unveiled Thursday. Banks unable to meet the new provisions to cover troubled holdings will have the option of presenting merger plans to the government by May and could get government assistance from an existing bailout fund that will be strengthened with an addition euro6 billion, said Economy Minister Luis de Guindos.

WASHINGTON - The Treasury Department said yesterday that another large investment company has raised sufficient capital to join the government in buying toxic bank assets, a strategy that’s designed to help spur more normal lending. Marathon Asset Management LP raised the $500 million minimum to begin operations. It was the eighth group to qualify. With the addition of New York-based Marathon, the selected companies have raised $5.07 billion, which the Treasury Department has matched dollar for dollar, using resources from the $700 billion bailout...

WASHINGTON - The Federal Deposit Insurance Corp. yesterday named the first winning bidder under a test of the government’s program to back private purchases of toxic mortgage assets and get them off banks’ balance sheets. Texas-based Residential Credit Solutions Inc. is paying $64.2 million for a 50 percent stake in a new company that will have about $1.3 billion in home mortgages from the failed Franklin Bank of Houston, which the FDIC took over in November. The new company will issue a note for $727.8 million to the FDIC.

WASHINGTON - The Treasury Department yesterday selected nine financial firms as partners for a program to buy banks’ soured, mortgage-related investments. Treasury officials said the program will try to relieve banks of up to $40 billion worth of these investments - complex securities whose value plummeted along with real estate prices. The amount Treasury has committed is far below the potential $1 trillion in assets that the government originally hoped to take off the banks’ books through this program and another that would have targeted bad loans.

HARTFORD - Connecticut Attorney General Richard Blumenthal said yesterday that he is investigating why a $1 trillion government bailout program designed to unfreeze the credit markets steers money to Moody's, Fitch, and Standard & Poor's and shuts out their six smaller competitors. He said the companies may have violated antitrust laws, and he alleged they overrated toxic assets before the meltdown. Blumenthal said he subpoenaed the companies for documents last week and asked Federal Reserve chairman Ben Bernanke to revise the bailout program to stop favoring the three rating...

The Federal Reserve Bank of New York says it has sold a portion of the toxic mortgage securities it assumed in 2008 from American International Group as part of the massive taxpayer bailout of the big insurer. The buyers are Barclays Capital and Deutsche Bank, which won in competitive bidding, the New York Fed announced Thursday. It said the securities were sold at a "desirable" price that maximizes recovery for taxpayers. But it said it won't disclose that price until July. New York Fed President William Dudley said the price "significantly exceeds" what the Fed paid for them.

WASHINGTON - The Treasury Department is making it easier for hedge funds and other private investors to participate in its plan for buying up banks' bad assets, an acknowledgment that the interest level so far has been lackluster. Analysts said the move shows the program hasn't yet attracted enough large fund managers, who may be wary of ending up on the wrong side of a congressional probe or public backlash. The program's requirements also excluded too many smaller managers, they said.

WASHINGTON - The Treasury Department is making it easier for hedge funds and other private investors to participate in its plan for buying up banks' bad assets, an acknowledgment that the interest level so far has been lackluster. Analysts said the move shows the program hasn't yet attracted enough large fund managers, who may be wary of ending up on the wrong side of a congressional probe or public backlash. The program's requirements also excluded too many smaller managers, they said.

WASHINGTON - Treasury Secretary Timothy Geithner defended his approach to fixing the country's economic mess yesterday, saying "the market will not solve this" while disclosing a bailout fund for battered banks has $135 billion left and might need more. Geithner used his first Sunday talk show appearances to promote President Obama's massive government spending plan to ease credit, help borrowers, and inject billions of dollars into the financial sector. Long kept behind the scenes, the treasury secretary has emerged as the administration's champion of a plan that fueled an uptick...