No Good Deed Goes Unpunished as Banks Seek Profits From Bailout

The Fed’s paid to free big banks of “toxic assets” and will pay again as these same banks profit on the final sale of “toxic assets”.  The PPIP was designed to lower the amount of these risky bonds which the big banks had on their balanced sheets—the banks actually increased their holdings.

Public-Private Investment Program was introduced in March by Geithner as a means of helping struggling banks by reviving the market for unpackaged loans and mortgage securities that aren’t backed by government-supported institutions, such as Fannie Mae or Freddie Mac. Under the program, asset managers were supposed to raise money from investors and, with additional capital and loans from taxpayers, buy as much as $1 trillion in toxic assets from U.S. banks, freeing up money for lending.

banks, which were expected to reduce their holding of such volatile mortgage securities, bought them before the government program was running and may now profit, said Michael Schlachter, managing director of Wilshire Associates, the Santa Monica, California- based investment-consulting firm. “Some of them created this mess, and they are making a killing undoing it.”

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