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Tuesday, September 8, 2009

China: Geithner's new sugar daddy

China Investment Corp (CIC)has a $300 billion sovereign wealth fund that has been putting money in hedge funds. Now they want to invest alongside Uncle Sam.

Yes, Uncle Sam!

In the PPIP. The Treasury's Public-Private Partnership Program.

The program designed to get rid of the toxic assets off of the books of the banks.

And their financing partner is you. The taxpayer. For up to 93% of the face value of these "assets."

And with China as Geithner's partner, who will then be able to look at their books?

From the WSJ:

China's $300 billion sovereign-wealth fund is eyeing big investments in distressed U.S. real estate, according to people familiar with the matter. To finance some of the deals, China may rely on an old trading partner: the U.S. government. In recent weeks, officials from China Investment Corp. have held talks with U.S. private-equity fund managers, including BlackRock Inc., Invesco Ltd. and Lone Star Funds, about potential investments in beaten-down property assets, namely mortgage securities backed by office buildings, hotels, strip malls and other commercial property. CIC also is considering buying ownership interests in buildings, according to the people with knowledge of the matter. In addition, CIC is weighing investing through one of the U.S. government's bailout programs, the Treasury's Public-Private Investment Program, known as PPIP. The program is designed to rid banks of toxic mortgage securities by enticing investors to buy these assets with financing from the U.S. government.

And if the returns are good, they may want to tap China's $2.132 trillion of reserves!

1 comment :

Anonymous said...

Isn't the reason these loans are "toxic" is because no one is going to offer these banks the amount they want??

Unless we trick the Chinese to overpay, I don't see how this will help.