Public/Private Bailout Strategy Lacking Private Interest
It’s one of the central tenets of the government’s strategy to get banks lending again: Wealthy private investors such as hedge funds are being encouraged, with enormous financial backing from the Treasury and the Federal Reserve, to swoop in and snatch up the toxic securities held by banks and other lenders, thus thawing the frozen credit markets.
There’s just one problem: So far, the private investors aren’t interested. The Washington Post today reveals the disheartening reason why:
[E]xperts say those investors are wary, concerned that if they participate in the program and ultimately make high returns, Congress will place retroactive limits on their behavior, particularly executive compensation and the hiring of immigrants through the H-1B visa program.
“It’s definitely off to a slow start,” said Peter Hooper, chief economist at Deutsche Bank Securities. “That appears to be because of investor caution concerning what the rules of engagement could be down the road.”
The Treasury is experimenting with clever ways to get around any congressional demands for behavioral changes like executive pay limits (more on this shortly). Meanwhile, the message is clear: The economic well-being of an entire nation hinges on a small group of financial titans retaining their many millions. At least there are no mysteries anymore.