A Commentors Thoughts On TALF And The RTC

Yesterday I wrote a post about TALF and the disturbing lack of transparency that seemed to be developing around the program. The article was picked up by Seeking Alpha and attracted a comment that I feel is worth reprinting.

I am quite concerned about TALF’s conspicuous lack of transparency. The public has no idea who is being invited to participate in the fund, how the fund is to be structured (how are profits split? how is profit defined? how are expenses defined? How are securities to be selected and priced? When does the fund cash-out?) and what the explicit terms of the financing are. Why aren’t the deal docs, along with a list of the invited participants, a schedule of fund creations -or whatever they are calling each of these structures, on Treasury’s website?
At the RTC, when we put together our public/private partnerships (before the internet existed) we advertised our intent to sell assets in the WSJ and NYT, deal docs were available in the RTC Library and prospectuses for the publicly offered bonds that were issued to fund the partnerships were available from the dealers, the SEC or the RTC.

I wonder what rationale Treasury is using to withhold this vital information from the public -if they are trying to preserve the prices of the assets (which would be a lame excuse by the way) they should inform the markets and the public and include whatever regulatory authority/exception they are relying on to legally withhold facts related to terms of a government enterprise that will dramatically impact the US taxpayer.
Also, at the RTC -no investor, board member. employee of a failed S&L could participate in the purchase of any assets we sold. That is how we resolved a conflicts problem that would have destroyed the RTC’s credibility. I guess the TALF folks aren’t too worried about such things,..

I remember those days and I had some passing contact with the RTC. The commentor is quite right in that there was a tremendous amount of data available to anyone who wanted to come in and bid on the assets for sale. Prospective buyers did have to show an ability to consummate the deal but it was a system that allowed a broad cross section in on the action.

The last paragraph is particularly important. I haven’t seen among all the posturing and moralizing around this crisis any serious attempt to make sure that those who were involved in causing the problem don’t profit from the solutions. Quite the contrary, it appears as if the banks stand to profit handsomely as the focal point for TALF. I can understand why they may be needed to help run the program but I might question whether they should be paid for that assistance.

I guess you can’t go back.


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