That didn't exactly go according to plan.
Ever since then-Treasury Secretary Hank Paulson came up with the idea of buying impaired assets directly from banks, the plan has met with waves of opposition that have forced its proponents to back off, retool it, and present it under a new light.
But the plan could never get past the fact that its main component involved overpaying banks for depreciated assets. It’s latest incarnation, the Private-Public Investment Partnership, or PPIP, still hasn’t. But now, it seems, it may not matter so much.
The Journal reports today that at least one part of the plan, the FDIC’s program to buy loans, “is stalling and may soon be put on hold.”
Prospective buyers and sellers have expressed reluctance to the FDIC about participating for fear the program’s rules will change in a political atmosphere hostile to Wall Street. In addition, some banks that might have sold troubled loans into the program earlier in the year have become less eager as they regained a sense of stability.
This is the smaller of the PPIP’s two programs; the one being set up to buy securities is still expected to move forward this summer, although if memory serves correctly, that was originally supposed to already be up and running. And the Journal reports that one, too, may be smaller than envisioned.
The PPIP story is on page C1 of today’s Journal, and just below it, linked in a way we’re sure was intentional but the Journal is too polite to point out, is another story, about the Fed saying banks got too aggressive in using projected future earnings to plug their capital holes.
Big banks were hoping billions of dollars in future revenue would help them fill the capital holes found in the government’s stress tests earlier this month. Now the Federal Reserve is limiting how much of that performance can be counted, according to people familiar with the situation.
Think the banks that don’t want to take part in the PPIP because they see their businesses getting back on track might change their minds if the Feds make capital-raising harder, or if, God forbid, their earnings projections turn out to be too rosy?
Because getting the government to put up 84c on the dollar to buy lousy securities might start looking awfully attractive if that’s the case.
