More billions "invested" coupled with acronyms...vaguely reminds me of military spending. This time its 20 Billion under a "Targeted Investment Program" or "TIP". This obviously extends my government's fascination with acroynms and the power of legitimacy they think it confers upon any amount of spending. I also note the copious use of the word "institution" as opposed to "business". Now an Institution clearly needs to be rescued as it is a public good. Assuming the antecedent anyone?
Anyway, I enjoy lists. So the "Treasury will consider the following" list is especially interesting. Is this an exhaustive list? How will the Treasury weigh the various factors? Who will oversee the process of including more entities in the "TIP"? And why was "Because they are friends and/or past, current, or future business partners with senior members of the Treasury and/or FED" NOT included as one of the factors?
As I have said before, access to government officials is the out-performing asset for all financial institutions. The mushy language (the list items are all discretionary) only confirms this.
Washington, Jan 02 2009 January 2 - The Treasury Department today announced
guidelines for its new targeted investment program, under which $20 billion has
been invested in Citigroup.
Citi remains the first and only participant of this program, and has
confirmed receipt of the $20 billion investment Wednesday.
Under the Emergency Economic Stabilization Act (EESA), Treasury is required
to release details on the investment program. The guidelines will apply to any
future participants though Treasury did not indicate that any were currently
In determining whether an institution is eligible for participation in the
program, Treasury will consider the following:
-Whether destablization of the institution could directly or indirectly
threaten the viability of creditors and counterparties.
- Whether the institution is at risk of a loss of confidence and how much
stress is caused by unstable or illiquid assets.
- The number and size of other institutions in similar situations or the
number of those that would be destabilized by the institution being considered
for the program.
- The extent to which the institution's financial position could potentially
cause disruptions in credit markets, destabilize asset prices, increase
uncertainty or weaken the overall economy. &nbs p;
- The extent to which the institution can access capital elsewhere.
As with other investments through EESA, Treasury may invest in any
instrument it deems a troubled asset and will require institutions to provide
Treasury with warrants or other considerations to protect taxpayer interests.
Participating institutions will also be required to cap executive compensation
and possibly limit expenditures.