Big Wall Street players see Geithner plan as a good deal

For a change, Wall Street today is happy with Treasury Secretary Timothy F. Geithner.

The stock market is broadly higher, reacting at least in part to Geithner’s long-awaited plan for the government to finance private investors’ purchases of rotten bank assets. The Dow Jones industrials were up 280 points, or 3.8%, to 7,558 at about 11:20 a.m PDT. Financial stocks were leading the charge.

Two huge money management firms, Pimco (Pacific Investment Management Co.) in Newport Beach and BlackRock Inc. in New York, quickly said they would participate in the asset-purchase program -- which obviously means they think they can make money off it.

"This is perhaps the first win-win-win policy to be put on the table," Bill Gross, co-chief investment officer of Pimco, said in a statement. "We intend to participate and do our part to serve clients as well as promote economic recovery."

Laurence Fink, CEO of BlackRock, told Bloomberg News that the program "is not a silver bullet. But it will take some of the overhang out of the marketplace. It is incrementally a really good thing."

Some other early reaction from Wall Street:

-- Tony Crescenzi, bond market strategist, Miller Tabak & Co.: "The Public-Private Investment Program will likely draw in major players to a market where there is currently no market. It will start slow at first, but portfolio managers will want to participate in part out of fear competitors will be participating and earning returns that beat their own. Explicit language on compensation and disclosure rules will help broaden its appeal."

-- Marc Chandler, currency strategist, Brown Bros. Harriman & Co.: "Although the Treasury's plan appeared to find immediate support among a couple large private asset managers, many pundits remain skeptical. Many still can't get their heads around how the toxic assets will be priced. Meanwhile, there is a sense of relief that the private asset managers who participate in the plan will not face the compensation limits of other [U.S.] programs."

-- Jack Ablin, chief investment officer, Harris Private Bank: "The Treasury is taking strong measures to ensure that private investors will come forward and snap up illiquid and troubled bank assets that are sitting in our largest banks’ digestive systems like a chimichanga fried in two-week-old oil. However, investors are legitimately concerned that Washington will change the rules and impose a special tax after the launch. Given the risk-and-return opportunities to private investors, the programs are shaping up to be a good deal."

-- Tom Petruno

Comments

[Dwight Nager]

Wall Street is such a bunch of piggies.

They just can't possibly think, "Well hey golly me, I've been getting paid 1-2% on assets under management, and 20% of whatever return, for so long that I've made wacky money. Gee whiz, why don't I sign up to do it for the greater good, and do it at cost + a (shudder the thought) $200k salary, until the banks have repaid their mess. Then I'll go back to big profits for me, but for the next few years, lets get the big profits back to the taxpayers who bailed out the Street."

Nope. All the piggies can think about is whether their bonuses might get restrained!

[The Mad Hedge Fund Trader, San Francisco, CA]

I’m sorry I’m late getting my comments out today, but I had to get my application in to manage the Treasury’s latest $1 trillion bailout program. They’re due April 10, and I wanted to get mine in ahead of Black Rock’s and PIMCO's. I only have to show $10 billion in assets under management and the ability to raise $500 million. For this, the FDIC will effectively lend me interest free long term loans to buy all of the toxic assets I want at deep discount prices with 6:1 leverage. I’m sorry, but I can’t resist those “heads I win tails, you lose” trades the Feds are offering, hence the rush. This certainly takes nationalization of the banks off of the table, and makes those buyers of Bank of America (BAC) two weeks ago at $2.50 look pretty smart. The government has now shot its wad, and there is really nothing else they can do now but sit back and pray until the $3 trillion in stimulus/bailout/reliquifying they have committed to starts to work.
www.madhedgefundtrader.com.

[Enough]

Why shouldn't Wall Street and the Banks celebrate. We have just been sold down the river by our government. They are celebrating because all of the toxic debts will now be guaranteed by the People. Instead of letting the banks and investors eat the loss they have created a situation where the same players will now make more money on transactions that we carry the risk for. This is an outrage and when the full extent of the sell out of the People becomes known the People will react. Enough is enough.

[Fabulous Wreckage]

This is despairing to the working poor who could finally afford a house. Now the Obama administration and Wall Street are going to use our tax dollars for a second bank bailout. They're going to buy these livable houses and hold onto them until prices get "better"?

Disheartening. Saddening. Disgusting. Shame on you, Obama. And I voted for you, too. Shame on me.