The Forgotten Toxic Asset Plan Re-Emerges: Mark Your Calendar

IanWyatt — Wed, 20 May 2009 17:31:00 GMT

May 20, 2009

*****The Forgotten PPIP

*****Geithner’s Dilemma

*****Profit Opportunities

Fellow investor,

I was starting to think that Treasury Secretary Tim Geithner was secretly hoping that everyone had forgotten about his plan to remove toxic assets from bank balance sheets. But now he’s out saying the Public-Private Investment Program (PPIP) should start in about six weeks. (Go ahead and mark your calendar now, in pencil, of course.)

As you know, I’m not a big fan of Secretary Geithner. That’s because, to me, he represents all that’s wrong with how the government has dealt with the Wall Street banks, the likes of which nearly brought down our economy.

He knew AIG (NYSE:AIG) was about to use TARP funds to pay bonuses and concluded there was nothing he could do. He knew AIG was about to pay Goldman Sachs (NYSE:GS) $12 billion out of TARP funds and again did nothing. He has consistently coddled the very companies that are in desperate need of tough love.

And frankly, that’s got me worried that Wall Street will go back to “business as usual” as soon as possible. Secretary Geithner has done nothing to stop it, and may even be encouraging a return to over-leverage by going to such great lengths to help these companies clean up their books.

*****The big question surrounding the PPIP is how Secretary Geithner expects to get banks to sell their toxic assets. Banks believe these assets will regain value over time. And between government bailouts and stock sales (see Bank of America’s (NYSE:BAC) $13.47 billion stock sale), banks are certainly going to operate under the assumption that they are well-enough capitalized to play the waiting game.

It seems to me the “stress tests” were an ideal opportunity to force the banks to sell toxic assets. But Secretary Geithner chose to lob softballs, and now he has no leverage.

Maybe he’s got a plan. I sure hope so…

*****As an investor and ruthless capitalist, I always look for profit opportunities in any situation. I might not like the outrageous stimulus spending coming from the government, but I’ll darn well recommend the stocks that will benefit from government handouts.

The PPIP is presenting a very nice profit opportunity for the companies that participate. That’s because the Fed and Treasury will help finance—with your tax money, of course—any toxic asset sales. Companies that participate have an opportunity to make large profits with very little up front risk. It’s a sweetheart deal, and I expect these stocks to move when investors realize what’s going. I’ve prepared a Special Report on the subject and you can get it HERE.

Email me at editorial@247investor.com with any comments or suggestions you have.

Kind regards,

Ian Wyatt

Editor

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The Forgotten Toxic Asset Plan Re-Emerges: Mark Your Calendar