PIPP - Psssss!

Know that sound of a ball deflating right in the middle of your game? Oops, it's time out on PPIP, Geithner's toxic asset plan.

The Financial Times reports the U.S. Treasury's plan to sell toxic assets, PPIP, is in trouble:

The controversial US toxic asset clean-up plan, aimed at clearing bad loans from US banks’ books to enable them to raise capital and lend freely, has fallen behind schedule, and may never be fully implemented.

The plan has fallen prey to concerns from potential investors and regulators and waning interest from the banks themselves. Investors fear that Congress may set caps on pay while regulators are beginning to doubt whether the plan is really necessary.

Last week, the Federal Deposit Insurance Corporation, which was supposed to provide finance for investors to purchase bubble-era bank loans, postponed plans for a pilot sale, saying it was less urgent than had been thought.

From Bloomberg, Dudley’s TALF Comments Add Signs of a PPIP Stall quotes New York Federal Reserve President William Dudley:

We’re still in the process of assessing whether a legacy RMBS program is feasible, and if it were feasible, whether it would be significant enough to make a major impact

Hopefully it's game over instead of a time out. That would be a very good thing since just last week we had TARP Banks trying to sell themselves these very assets.

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With Suspension of M2M

When Mark-to-Market was suspended, the banks had no incentive to sell at lower prices. No wonder it has failed.

Regardless of all the recent happy news re: Recession has Ended - the U.S. economy has not fully de-leveraged. This must occur at some point.

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Cross Reference

Calculated Risk has at least 2 articles on the failures of our current Treasury Alphabet Soup

FDIC PPIP LLP DOA? Part II

 

NY Fed President on PPIP

 The suspension of M2M made PPIP unnecessary. It seems that the FASB was at cross purposes with the Treasury.

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