Banks might be back to their old tricks. There’s speculation that some banks might be looking to buy more toxic assets using taxpayers' dollars!
That’s right. Those same banks that received billions of dollars of TARP money want to place bets on the same level 3 assets that got them into trouble in the first place -- and with government support.
The $1 trillion Public-Private Investment Program (PPIP), where the government provides much of the financing and shoulders much of the risk, leaves open the prospect that banks could buy the troubled securities and loans.
This means recipients under the government's $700 billion bank bailout fund, the Troubled Asset Relief Program, might take part.
And late word suggest it’s more than just a hypothesis – according to published reports big banks are looking to get into the game.
Reuters says, Morgan Stanley Chief Executive John Mack told employees his bank may buy toxic assets and package them for sale to individual investors, according to a person who heard him speak, but was not authorized to comment publicly. Three days earlier, Goldman Sachs Chief Executive Lloyd Blankfein said his bank may also join the PPIP, as an investor.
Each of these banks took $10 billion from TARP.
A recent article the Financial Times supported these claims and went on to say that Citigroup and JPMorgan Chase, which together took $70 billion of taxpayer money, might also buy toxic assets under the PPIP.
Two other large TARP recipients, Bank of America and Wells Fargo, had no immediate comment on their plans.