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Cmte Financial Services (R)
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Bachus Introduces Bill to Prevent TARP Banks From Swapping Toxic Assets For Profit at Taxpayer Expense
WASHINGTON, Apr 2 -
Congressman Spencer Bachus (AL), the top Financial Services Committee Republican, issued this statement regarding legislation he introduced to prevent TARP recipients from gaming the Public-Private Investment Program: Business Week reported that under Geithner's toxic assets bailout scheme, "A bank could effectively swap its existing portfolio of junky loans for another one very similar-only this time limiting the downside by using government loans and guarantees. The bank would auction off its loans to a public-private partnership. Then, using a portion of the auction proceeds, it would set up a different public-private partnership that would of course have access to government loan guarantees and matching funds. The bank would use the new partnership to buy a portfolio of similar problem assets twice the size of its old portfolio. The bank would then split any gains from the new portfolio 50-50 with the feds-but risk no more than the sliver of equity it contributed to the deal."
"If reports circulating in the financial press are accurate that financial institutions are colluding to swap assets at inflated prices using taxpayers' dollars, the bailout cycle has sunk to a new level of absurdity.
"Accordingly, I am introducing legislation today to ensure that institutions that offload their toxic assets under the Administration's new Public-Private Investment Program are prevented from gaming the system to reap taxpayer-subsidized windfalls."
NOTE: The bill, H.R. 1893, can be viewed HERE.