Obama Administration Working On Details Of Bad Bank Funding Plan

The Obama administration continues to work on the details of the "bad bank" part of new financial rescue plan, and is considering creating multiple investment funds to purchase the "legacy" assets that litter the bank's balance sheets, according to reports from the Wall Street Journal. Link to Fact Sheet of the "Financial Stability Plan".

According to the report, no decision has been made on the final structure of the so-called private-public financing partnership, but one leading idea is to establish separate funds to be run by private investment managers. The managers would have to put up a certain amount of capital. Additional financing would come from the government, which would share in any profit or loss.

The private investment managers would run the funds, deciding which assets to buy and what prices to pay and the government will contribute money from the Treasury and Federal Reserve. To encourage participation, the government would try to minimize risk for private investors, possibly by offering non-recourse loans.

Some of the nation's largest banks that would benefit from such a plan would include: Bank of America Corporation (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM), Citigroup, Inc. (NYSE: C), Wells Fargo & Company (NYSE: WFC), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS).

Link to WSJ Article