10:05: Treasury aide Gene Sperling has started the call and is introducing everyone.
10:09: New scheme is based on three principles. There is nothing that protects private sector participants from losing principle. Gains will be shared with taxpayers.
10:11: We’re sharing risk, not sharing the private sector from risk.
10:12: “If you simply had a public sector program, where those of us in the public sector were asked to determine the price, there’d be a great chance of getting it wrong.”
The key: Trying to come up with a price as if there were functioning credit price.
10:13: Sperling goes back to Geithner’s example of trying to sell a home if there were no way to get a mortgage.
10:14: Matt K. Baker takes over the call. Says: ‘We’ve been spending a lot of time that lifts the tide and repairs some of our damaged boats.’
10:16: Harps more on the idea that private sector takes risk and the public sector takes upside reward.
10:18: Going to choose a handfull of asset managers that will be “Treasury-approved” a designation that they’ll be able to use to go out and raise capital.
Question from PE guy: How will managers be selected?
Answer: There’s an application out there for you too look at.
Question from Brad Delong, Berkely econ prof and blogger: How much of the remaining TARP funds will be used?
Answer: Range of $75-$100 billion. But it’s flexible. Ideally, this will encourage non-TARP investing as well. Ultimate goal is to “put ourselves out of business”.
Delong (again): Citing a similar situation in 1800s in England where the Chancellor of the Exchequor tried to restore confidence in banks by writing a letter. Says more needs to be done this time that’s more than just trying instill confidence.
Answer: Won’t take you on in your understanding of financial history of England in 1830s.
Delong: Fighting back again. Dominating the call.
Answer: More of the same. “We’re really just starting the battle”
John Carney (Clusterstock): What about concerns that even with leverage, prices will be too low. How have you arrived at the confidence that bids will be high enough.
Answer: We can’t guarantee participation. Just trying to use the tools that we have to reduce the big-offer spread. The banks may sell assets at a loss if it means raising private capital again. “That is the feedback we’ve heard from several institutions specifically… the ultimate shrinking of that offer spread will be a combination of that psychology… [missed rest].”
And that’s it! Short and sweet.