When the Obama administration announced today the names of the nine fund managers it had selected to run public-private partnerships that it hopes will buy as much as $40 billion of toxic securities from banks, lots of people noticed the the bond giant PIMCO was not on the list.

The nine manager groups are Alliance Bernstein LP, with sub-advisors Greenfield Partners LLC and Rialto Capital Management LLC; Angelo Gordon and Co LP with GE Capital Real Estate; BlackRock Inc ; Invesco Ltd ; Marathon Asset Management LP; Oaktree Capital Management LP; RLJ Western Asset Management LP; Trust Company of the West; and Wellington Management Co LLP.

So what happened to PIMCO, which has been a very public advocate of government plans to buy up debt? It seems that PIMCO decided that the government has been too unpredictable, changing directions a number of times. They just didn’t want to play a game where they couldn’t rely on the rules staying the same.

The fund managers who are playing now have to raise at least $500 million from private investors.  Treasury will then match this and lend up to 100 per cent of the total equity in the partnerships to finance acquisition. If you are keeping track, that means that the capital structure of the partnership will be three-fourths taxpayer money and 1/4 private investment.


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