MercoPress. South Atlantic News Agency

Over 100 applicants for US Treasury plan to purchase toxic assets

The United States Treasury Department revealed on Wednesday that over 100 applications have been received from firms seeking to manage the government program to help purchase toxic securities from banks. The US government is relying on private investors to purchase poorly performing real estate investments currently weighing on bank balance sheets.

The program which has targeted an estimated one trillion US dollars in so called toxic mortgages is considered crucial in dealing with the worst banking crisis to hit the United States and by extension to the world financial system in seven decades.

Under the so-called Public-Private Investment Program, private investors and the US Treasury would put in equal amounts of money backed by a loan guarantee from the Federal Deposit Insurance Corp. to buy troubled loans and mortgage-backed securities from banks. The purchases would be made through auctions.

The US Treasury plans to pick five large private investors to bid on illiquid securities sold by banks. Several smaller firms will likely be chosen to take part as well.

The more than 100 applications that Treasury is now reviewing for the toxic securities purchase program are for the fund managers who will compete for purchases of the troubled securities. This includes a variety of firms applied, from traditional fixed-income managers to real estate managers, the government said.

The Treasury's statement said the initial 100 applications would now be evaluated to determine their capacity to raise private capital and manage funds “in a manner consistent with Treasury's goal of protecting taxpayers.”

The US government said firms that pass this preliminary screening will be notified around May 15. At that time, they can begin the process of raising an expected minimum of 500 million USD in private capital to participate in the program.

In its release the US Treasury anticipates opening the program to smaller fund managers in the future, which may result in a lower minimum private capital raising requirement. “Since announcing the program details on March 23, Treasury has encouraged small, veteran, minority and women owned private asset managers to partner with other private asset managers”.