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FDIC seeks pension funds' interest in toxic-loan purchases

April 3, 2009 | 11:39 am

Major pension funds today are getting pitched to participate in the Obama administration's plan to buy banks' toxic mortgage assets.

Federal Deposit Insurance Corp. Chairman Sheila Bair was scheduled to brief the funds, including the California Public Employees’ Retirement System, on the program. The California State Teachers Retirement System also was invited.

A CalPERS spokeswoman said one of the questions the fund had was whether it could buy loans directly from banks under the program, rather than using a money manager to handle and manage the purchases.

Sheilabair After suffering severe losses on so much of their stock market and private-equity assets over the last year, it’s not surprising that pension funds would be looking for opportunities elsewhere. The Obama administration’s loan-purchase program is aimed at enticing big investors by offering to have the Treasury and FDIC shoulder much of the risk.

From Bloomberg News:

The invitation-only meetings [with Bair] are taking place at the New York office of the FDIC’s financial adviser, Perella Weinberg Partners.

"Sheila really wanted to get input as this program is refined," said Peter Weinberg, a partner at the New York-based firm. "She’s listening and seeking advice from market participants."

Bair is drumming up support for a $1 trillion plan Treasury Secretary Timothy Geithner unveiled last month to help rid U.S. banks of the loans and securities clogging their balance sheets. The FDIC is in charge of a program that would form investment pools to buy devalued loans from banks.

Under the Legacy Loans Program being set up by the FDIC, private investors would buy equity in loan pools, with any contributions matched dollar-for-dollar by the Treasury. The equity then would be supplemented through the sale of debt guaranteed by the FDIC.

-- Tom Petruno

Photo: FDIC Chairman Sheila Bair.Credit: Brendan Smialowski / Bloomberg News

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