Big Wall Street players see Geithner plan as a good deal
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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