Bailout Honchos Weigh Toxic-Asset 'War Bonds'

Treasury's new idea would allow private investors to profit from bailouts
By Clay Dillow,  Newser Staff
Posted Apr 9, 2009 8:11 AM CDT
Bailout Honchos Weigh Toxic-Asset 'War Bonds'
Treasury Secretary Timothy Geithner appears on CBS's "Face the Nation." The Treasury's latest plan would allow Main Street investors to put money into funds composed of troubled bank assets.   (AP Photo/CBS Face the Nation, Karin Cooper)

Responding to charges the bank bailout privatizes profits while socializing losses, the Obama administration is exploring creating mutual-fund-type instruments that would allow private citizens to invest in toxic assets. The bailout funds, akin to war bonds, would allow the taxpayers who funded the bailout to profit along with Wall Street, the New York Times reports. "It’s giving the guy on Main Street an equal seat at the table next to the big guys," said a money manager.

The idea is fraught with risk. If the assets appreciate, that would quiet accusations that the bailouts benefited only the gilded few, including many who contributed to the economic crisis. But if the funds lose value, both the economic and political ramifications would be dire. The Treasury is seeking about five fund managers initially, and investors could participate for as little as a few hundred dollars.
(Read more Timothy Geithner stories.)

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