Tuesday, May 12, 2009

Warren's Warning to PPIP investors

If you participate in the Treasury's plan to buy troubled bank assets with Treasury funding, TARP Oversight Panel chairman Elizabeth Warren suggests they should face unspecificed oversight. "If you want to take taxpayer dollars, you cannot conduct business as usual," said Warren. She implied that participating in this plan is basically receiving taxpayer dollars. CNBC tried to pin her down as to what this would mean, and she was very careful not to say anything specific, just to leave the door open.

Clearly, investing in the Treasury's PPIP in that context invites a lot of 'operational risk'. I don't know why a large hedge fund would risk such an entanglement.


Anonymous said...

Which is why most hedge funds won't invest much unless they're major bank bondholders. The bondholders get the taxpayer money coming (via TARP) and going (via FDIC non-recourse loans).

Anonymous said...

Because it is a free put option. I've never seen any hedge fund walk away from an undervalued put option let alone a free one.

Anonymous said...

amongst those who ultimately shape policy, who really listens to warren? how effective has she been as the tarp watchdog? her recent assessment of the tarp program was for all intents and purposes ignored by the public...do you think that summers and his puppet geithner look to warren as a shill for their ideas? my sense is that they cringe when she opens her mouth. if summers has been effective in marginalizing volcker, i would guess that warren will be worn out by the summers rope-a-dope....more importantly, with the potemkin village financial accounting now sanctioned by the government and the fasb, who needs the ppip? if any firm sells assets into the ppip they are in effect contradicting the fiction of the "stress tests"