And I'm serious about the quest for knowledge thing. I have no ax to grind either way. Unlike many, I want to actually figure out whether to support it or not based upon how it works, not who's issuing it or who stands to profit from it. Walk with me.
The Treasury Department issued a Fact Sheet on the Public-Private Investment Program on its website. I've been going over it, and I was hoping that some people here who are more knowledgeable than I am about such things could help me out.
First, it gives an example 6-step process concerning removal of bad assets. In the example, for mathematical simplicity, they say that a bank approaches the FDIC with $100 of bad assets.
Step 2 states the FDIC "would determine...that they would be willing to leverage" the assets at a 6:1 ratio.
Question 1: This implies a review process of some sort. So, how "automatic" will the process be? Will the FDIC reject some assets? If so, on what basis(es)?
Step 3 states there will be a bidding process. In the hypothetical example, the winning bid on the $100 asset is $84. Makes sense...that's the 6:1 ratio mentioned.
Question 2: What happens if the highest bid isn't $84, but something less? What happens if its greater than $84, or greater than $100?
Steps 4 & 5 - FDIC guarantees $72 of the $84, and Treasury guarantees $6 of the remaining $12.
Step 6 then states the private investor will manage the service with oversight from the FDIC.
So, let's say this $100 asset does go up in value over time, and is sold at $120.
Question 3: How would the money from that be divvied up between the gov't and the investor?
Thanks in advance for the help!