Tuesday, March 24, 2009

Some optimism, some pessimism

Some initial reactions to the Geithner plan:

The public seems to be proving more optimistic about Treasury’s toxic-assets plan than economists were this morning.

  • Bill Gross of Pacific Investment Management Co. said, “This is perhaps the first win-win-win policy to be put on the table and it should be welcomed enthusiastically…We intend to participate and do our part to serve clients as well as promote economic recovery.” Gross added, “From Pimco’s perspective, we are intrigued by the potential double-digit returns as well as the opportunity to share them with not only clients but the American taxpayer.”
  • Curtis Arledge, co-head of U.S. Fixed Income in BlackRock’s Fixed Income Portfolio Management Group, expressed similar optimism. “There will be large amount of capital that is going to come in to buy these assets which will change the equation,” he said. “Giving investors capital to buy these assets is going to improve their pricing.” Alredge added: “In the big picture, the government is trying to restore economic growth…More capital is needed than the government can supply. We trust them. We also think they are very intelligent about how they think about this issue.”
  • Ron D’Vari, co-founder and chief executive of New Oak Capital in New York said, “We would definitely be interested in the asset classes that have been identified for the program.” He continued, “Clearly these assets aren’t going to be sold at par…They are held on banks’ balance sheets and held to maturity, which means if they were Triple-A rated securities they will have been held at par and not written down.”
  • Meantime a Bank of America spokesman offered a somewhat supportive response: “We are in favor of the concept but are studying the details.”

There’s still some skepticism, though.

  • Kevin Hebner, strategist for global macro investment fund Third Wave Global Investors said: “Traders and portfolio managers don’t want to be investing with career bureaucrats.”
  • David Trone, an analyst from Fox-Pitt Kelton Cochran Caronia Waller, said, “Some private investors may not want anything to do with this plan at any price because of the way the government has become radical in changing rules.”

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