Perhaps what’s mot striking about the premature death of Tim Geithner’s public-private partnership, is that the Treasury can’t even articulate a basic set of rules for participants.
Earlier this week, a Treasury lawyer confirmed that pay caps would apply to firms participating in the PPIP. But there’s still some debate as to whether that applies to sellers of toxic assets, buyers of toxic assets or both. Participants still don’t know.
FT notes that today is the deadline to apply to be a buyer of assets, and the mood is glum. Despite the lure of free money, which is what it is, investors haven’t been banging down the door to get it.
Yet some fund managers fear Congress and the government may change the rules mid-course, as they did with Tarp. Wesley Edens, chief executive of Fortress Investment Group, said: “The most important thing for the government is consistency.”
Colm Kelleher, finance chief at Morgan Stanley, which is considering buying some of these assets, said this week: “I don’t understand what the implications for corporate governance are … [The authorities] need to be clear what the implications are.”
Another senior fund manager said: “No one wants to go into the programme only to find out after the fact that there will be strings attached.”
In the end, as Megan McArdle notes, the government has no way of ensuring participants anything. There’s nothing the government can do that can restrict what it does in the future. If nothing else, Barney Frank can always call a hearing, which is its own kind of PR hell, if not necessarily a rule change.