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Posts Tagged ‘Geithner’s new plan’

Public-Private Partnership? or “Won’t You Be My Neighbor?”

Posted by Larry Doyle on March 23rd, 2009 9:22 AM |

An oversimplified view of the proposed private-public partnership for investors to purchase toxic assets from banks is as follows:

A couple (private investor) looking for a home finds a piece of property (toxic asset) that seems very appealing. A mortgage broker (the government) is indicating that he can preapprove some very attractive financing terms. The mortgage broker also indicates that he can fortuitously provide a large cushion against potential losses on the property. The buyers inquire how that cushion may work. The broker informs them that he has access to funds from all the other homeowners (taxpayers) in town to offer as incentive to sell this property and others like it. 

The couple’s interest increases, but they start to wonder what’s the catch as the property has been on the market for a while.

Upon further review, the prospective buyer discovers that the property may have structural issues. In hearing that, they think about scaling back a potential bid on the property. The broker pressures them to the point where the couple starts personally disliking the broker. (more…)

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