Word: auction
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How/who will determine how much to pay for these securities? They haven't really figured that out yet. One possibility would be to hire private managers who would get a share of any profits. And there's lots of talks about using various auction methods to price them. But I have yet to hear a really convincing explanation of how this would work...
...Gregg, the top negotiator on the bill for Senate Republicans, described as a massive car accident in the middle of the highway. The government must clear the accident away by buying the toxic debt so that normal traffic can flow freely. One avenue will be to do a reverse auction, where banks compete to sell the Treasury their bad paper, with the Treasury choosing the lowest offers. The Treasury may also directly negotiate with companies, though no one knows exactly how that will work...
...final talks, which for some staff went well past 3:30 a.m. Sunday morning. But a compromise was reached that places a tax on executive salaries and bonuses of $500,000 or more at companies in which the Treasury has bought more than $300 million in assets at auction. For companies in which the Treasury intervenes directly, a 20% surcharge on golden parachutes is instituted...
...equity markets' sanguine response to the Hill, the credit markets are still seizing up. The process by which Paulson will actually use the $700 billion to buy the bad loans remains more than opaque. Sources familiar with his plans say he intends to structure some kind of reverse auction, where holders of the loans compete for the pool of money, pricing their loans as low as they can to still survive. But a slew of academic experts in auction theory have yet to determine exactly how to make that work. Nor is it a guarantee that some of the worst...
...There are, for sure, legitimate criticisms of the SEC under Cox. The agency, by most accounts, could have taken a more active role in going after firms that misleadingly sold long-term auction-rate securities as cash-like investments, as the Secretary of the Commonwealth of Massachusetts, who filed complaints against a number of companies, has suggested. In April, when the Treasury Department put out a blueprint for reforming financial markets, which included a possible abolition of the SEC, Cox probably didn't bolster his staff's spirits by not immediately standing up for his agency's autonomy...