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Toxic Assets Will Soon Be Available from These Financial Firms

The Treasury picks nine companies to handle the sour loans.

Finally, the Public-Private Investment Program (PIPP) is getting started. Just this week, the Treasury Department announced that it has already selected nine financial firms that will buy banks’ toxic mortgages. These include BlackRock Inc.; TCW Group; AllianceBernstein, LP and its sub-advisers Greenfield Partners LLC and Rialto Capital Management LLC; Angelo, Gordon & Co. LP and GE Capital Real Estate; Invesco Ltd.; Marathon Asset Management LP; Oaktree Capital Management LP; RLJ Western Asset Management LP; and Wellington Management Co. LLP. Real estate investors are scrambling to raise millions of dollars to purchase these loans.

For those not familiar with the program’s long struggle to approval since March, banks have refused to show support even if the program was aimed at getting them unload their sour loans. That’s because they would be compelled to issue rock-bottom prices and sulk at the writedowns in their books. And of course, after paying back their TARP funds, no bank is sure enough that the government will exercise a more stringent rule with the PIPP. Their nightmare began when the government decided to launch the Legacy Loans Program where they used the PIPP’s funds to sell assets of the banks that were already seized.

For everyday investors, this is funny since battered assets continue to drain the banks of their remaining health in the industry yet they still refuse to drop them in the market. Obviously, these moribund banks will do everything to protect their businesses even if it means creating long, long excuses. But these banks have gone beyond their limit. It is right to regulate them the best way the government could even if it means they have to divest their toxic loans at prices that could hurt their balance sheets.

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