Admittedly very unscientific, but our cursory search for fresh news about the government’s Public-Private Investment Program yields little to nothing of any substance in more than three weeks. Radio silence since July 8th when Treasury named a bunch of investment firms to act as fund managers for the program.
Treasury...signal's faint, can barely read you. Treasury...do you copy?
Still plenty of bargains for smart shoppers!
We had hoped that the Public-Private Investment Program, the so-called PPIP, would wither on the vine and die a quiet death. Call us crazy, but a plan to spend a trillion dollars to grossly overpay for deteriorating assets choking banks’ balance sheets didn’t strike us as the best use of the government’s money.
Well, it didn’t exactly die, but what’s been loosed upon the world is a shadow of the original plan. And that’s a good thing.
When it was first announced, the PPIP was envisioned as a major program, as in $500B-$1 trillion major. But the version that was announced yesterday will see the Treasury Department contribute “only” $30B (roughly what they threw at GM.) The reason is, simply, lack of demand. But the reasons behind that reason aren’t so simple.
That's right, still standing, didn't cave, hanging tough, not giving in...
Bulls looked as if they were on the ropes a couple times today, but manage to stave off another push lower for US stocks, with a little help.
After bears did some late morning/early afternoon damage, bulls regroup following a pretty well-received 10-yr auction.
But the rebound proved wispy, with stocks eventually slumping to fresh session lows. Losses were pared, and then headlines carrying additional details of the government’s PPIP plan started hitting the tape, pressing major averages into positive terrain. Got to admire the timing.
Health care, consumer discretionary lead advancing sectors; financials were exceptionally weak, but shaved declines into the close. DJIA adds 14.81 points to 8178.41, and Nasdaq Comp up a point to 1747.17. S&P 500 ends 1.47 lower at 879.56.
Hooray! We surely have enough capital now!
US banks have managed to raise tens of billions in fresh capital recently, but it’s not enough to warrant a rapid upgrade from Moody’s.
“We do not expect these recent capital raises to result in a quick reversal of our US bank financial strength ratings to previous levels,” firm says, because of the still fragile state of the economy. “Should macroeconomic conditions worsen, Moody’s does not believe the recent capital raises represent an adequate buffer against the asset quality deterioration that would likely result.”
And, firm adds, further economic deterioration could result in the equities market quickly shutting down for the banks, limiting their ability to raise more capital. Continue reading…
Like we said, the basic problem with the PPIP is it overpays for lousy assets. But that’s not the program’s only problem.
The real problem with the PPIP is banks are holding toxic assets way above market values, Yves Smith writes at naked capitalism.
“The problem is not the salability of said assets, it’s that they don’t like the prices,” she says, which helps explains why the two previous efforts to get toxic assets off of bank balance sheets have failed.
On this bright road to recovery, the stress tests on the nation’s 19 largest banks and the Chrysler bankruptcy mark two fundamental examples that clearly bear Obama administration’s stamp.
Unfortunately, the results to this point seem questionable.
The delay of the stress-test results to Thursday have created even more confusion among investors, who question who’s actually administering these tests – the government or the banks themselves.
Bulls come stampeding back onto Wall Street near the closing bell, as a late rally nearly wipes away equities’ losses. But stocks are done in by cross-currents swirling around the banks, and Sun Micro getting petulant in its courtship with IBM.
DJIA falls 42 (0.5%) to 7976, after falling as much as 156 earlier; S&P 500 loses 7 (0.8%) to 835, Nasdaq Comp drops 15 (0.9%) to 1607.
Financials fall after Calyon’s Mike Mayo suggests loan losses will eventually top those of the Great Depression, despite government assistance.
The more that comes out about the Treasury Department’s Potemkin Village of a market platform for impaired assets, the so-called Public Private Investment Program (yes, as we all annoyingly know by now, it’s pronounced “PEE-pip” by the smart kids in Washington), the worse it sounds.
Because it’s starting to sound like a rigged game.
The latest revelation comes courtesy of the Treasury Department’s application form to be a fund manager in the PEE-pip, as the Wall Street Journal recounted yesterday. Only firms that already have at least $10 billion of toxic securities under management are eligible. That leaves us out, and just about everybody else, too.
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