After the announcements that our financial problems will be inundated with more money, investors are scrambling to find ways to squeeze out all they can from the rescue plan, which may hopefully rejuvenate the financial sector and exchange traded funds (ETFs).
Banking executives are calculating the best way to utilize the Treasury proposal to sell their troubled assets while traders and small hedge funds are pondering the likelihood of buying them, reports Graham Bowley and Mary Williams Walsh for The New York Times. This is where the dilemma lies.
The fundamental queries regarding these investments is whether or not this plan will be the final one and what these debts are actually worth. Banks want to sell the troubled assets high and banking executives have already stated they are unwilling to sell assets at “fire-sale” prices. On the other hand, Potential investors would want to buy low.
Then there are problems in allowing banks to make profits with government financing, and investment houses that may overpay to increase investment valuations, which would be at the expense of taxpayers. The current administration will have to be able to touch upon a balance between the interests of investors and taxpayers, but some think the deal may favor investors.
PowerShares filed to launch two ETFs that would cover bonds back by pools labeled as “prime” and “alt-a” mortgates, writes Ian Salisbury for The Wall Street Journal. It is thought that the new ETFs would revive the market for these securities by opening this area up to small investors. This idea recieved renewed interest after Treasury Secretary Timothy Geithner announced something like this.
Back in October, Mark Cuban had also suggested bundling up toxic assets in a similar manner.
Max Chen contributed to this article.