Private Equity-Backed Bailout?
Is private equity the new taxpayer? That seems to be the word out of Washington DC, where Tim Geithner tomorrow will introduce the nextest bestest bank bailout plan. Details are still sketchy, but Geithner apparently will propose that the second half of allocated TARP funds be used to buy up so-called “toxic assets” from bank balance sheets. If that sounds familiar, it’s because that’s what the first half of TARP funds was allocated for (before Hank Paulson became a serial freelancer). The difference seems to be that Geithner wants private investors to also chip in, since the price tag will be WAY more than $350 billion. That means private equity, hedge funds and anyone else sitting on a pile of dry powder. The assumption is that such investments would come with major downside protections, as an incentive for investors who, for the most part, have eschewed the opportunity to buy said “toxic assets” on the open market. The obvious question, therefore, is if private equity firms would want any part of this?
