By most estimates, there are $1.5 trillion to $2 trillion in assets that fall into the troubled category, either in that they illiquid or non-performing.
Two key financial industry trade groups, the Financial Services Roundtable and American Securitization Forum, issued statements saying that supported virtually all of the financial stability plan's measures.
The Geither plan assumes that there’s adequate private sector capital available. There’s some agreement about that in Washington and on Wall Street.
Rep. Jeb Hensarling (R-Texas), who was among those in Congress pushing for a private capital component in the original TARP legislation, called the current idea "feasible" because there's a lot of money "sitting on the sidelines,” but still favors the insurance-based model he proposed, wherein firms participating in the asset transactions pay fees.
Carlye Group co-founder David Rubenstein, for one, recently told CNBC that “private equity does have capital.”
The fund, however, appears no more likely to solve the riddle of pricing, such that buyers don’t overpay and sellers don’t accept fire sale prices, even though the intent is to have private sector buyers essentially establish market prices rather than a government entity.
Rubenstein considers pricing the principal problem because “many people who own assets don't yet want to recognize that their value has gone down so much that when they sell they’re going to take a bigger write down than they would want to take.”
Rubenstein estimates it could take six to none months before sellers are willing to enter the market and accept a proper haircut.
What’s unclear, however, is how much government money such an approach will entail.
The Geithner plan doesn’t address that, nor does it indicate where the funding would come from. About $350 billion remains in the TARP, but given all the other measures in the plan, that might not leave much available, which would require another source of funding.
In a recent interview, Rep. Brad Sherman D-Calif.) shared his concerns about the government purchases or guarantees of bad asset purchase, saying if the Fed got involved "it would clearly give the government more money to work with.”