PPI Is an Insiders Game: "It's Ugly"

WSJ comments on what we have reported on many times, Treasury's new Public Private Partnership is really about insiders raping the taxpayers in clever, complex ways. Here's WSJ (my emphasis):

The Obama Administration insists it wants to "partner" with private investors for its new toxic-asset purchase plan. But the more details that emerge, the more it seems Treasury wants to work with only a select few companies. This is no way to conduct a bank clean-up.

The investment community was already suspicious last week when Secretary timothy Geithner unveiled his plan, announcing that Treasury would select four or five companies as "fund managers" to purchase toxic securities. Given that the whole idea is to create a liquid market for these assets, we'd have thought Treasury would encourage as many players as possible.

But the bigger shock was when Treasury released its application to become a fund manager, a main rule of which is that only firms that already have a minimum of $10 billion in toxic securities under management can apply. Few hedge funds, private equity players or sovereign wealth funds come near this number. The hurdle would bar many who specialize in the very distressed assets that the Obama Administration is trying to offload from banks....

"This is ugly," says Joshua Rosner, the managing director of Graham, Fisher & Co., an independent research firm. "As long as they are experienced, there is no rational reason for creating limitations on who becomes a bidder and manager of assets. It doesn't serve the public good, though it may serve those few large firms that appear to have a privileged relationship with Treasury."

We have no idea if Treasury is playing favorites, but it certainly doesn't look good. All the more so given that some of these big players may have consulted informally with the Obama Administration as it was writing the plan. Not to mention that the big asset management companies that are most likely to land plum fund-management jobs are also the ones that have been most vocally praising the Treasury plan...

Smaller players can now only take part in this program if they agree to "buy" into the funds run by one of the exclusive managers. So not only is the government going to be anointing a favored few to invest in these assets. It is also giving those favored few the opportunity to collect fees and profit-sharing from anyone else that wants to go in with them. In the wake of the AIG bonfire, Mr. Geithner is tempting another outcry.