Toxic Assets, Be Gone!

The government has finally outlined a plan for the "toxic" assets on banks' balance sheets, and the Wall Street Journal and New York Times provide similar accounts of what's in store. Once dubbed the "bad bank," the program is now being sold as a "three-pronged approach" that will be announced as early as Monday. It will potentially offer "generous subsidies," such as low-interest loans, that could encourage investors to buy up the bad assets, the NYT writes.  

First, the FDIC will create a "special purpose partnership" that will lend out about 85 percent of the assets needed to buy up the troubled assets. Sound confusing? Yeah, it doesn't get clearer than that. Second, the Treasury will tap about four to five asset managers, and will match the private money that each of the firms puts up, writes the NYT. Third, the Treasury will ramp up lending through the $1 trillion TALF program, or the Term Asset-Backed Securities Loan Facility. The approach "is perhaps the most central component of President Obama's plan to rescue the nation's banking system from the money-losing assets weighing down bank balance sheets, crippling their ability to make new loans and deepening the recession," the paper writes.

The plan, which relies heavily on the private sector, including hedge funds and private equity firms, may have a few roadblocks, according to the WSJ. Private investors have been targets of a "virulent anti-Wall Street backlash from Washington in the wake of the American Internal Group Inc. bonus furor," and may be reluctant to get involved, the paper said. If they do take the leap, the upside for taxpayers is that private investors will vie for the assets, and will acquire the loans at bargain basement prices.  

The Washington Post reports that AIG is suing the Internal Revenue Service in an effort to get back $306 million of taxes, interest, and penalties. What's more, AIG has also requested that the government pay the costs of the lawsuit. Talk about biting the hand that feeds you.

The Financial Times intercepted a memo sent by Citigroup CEO Vikram Pandit, that responds (in a diplomatic, memo kind of way) to investigations being led into financial institutions that have received aid. "The work we have all done to try to stabilize the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial services employees," he wrote. "At our company, we removed the people responsible for Citi's financial distress and acted fast to strengthen and streamline the business, and install new risk processes and new risk personnel."

CNNMoney has been like a bedpost, tallying the notches when it comes to bank closures. The site reports three more banks closed yesterday—Friday is judgment day for banks—making 20 total this year.

Bloomberg reports that General Motors and Chrysler may require "considerably" more than the $21.6 billion in aid they requested, Steven Rattner, the Treasury's chief auto adviser said on Bloomberg TV. President Obama's auto task force is looking over proposals submitted by GM and Chrysler to determine whether the government should provide assistance, "or tip the carmakers into bankruptcy. The task force will give the companies a "sense of direction" by March 31, the site reports.