U.S. bank bailout to rely in part on private money: report

(Reuters) – President Barack Obama’s revised bailout plan for the banking system is likely to rely in part on private sector investors other than banks to buy the contaminating assets that wiped out the capital of many banks, the New York Times said, citing administration officials.

The officials told the paper that they are counting on the profit motive of private investors like hedge funds, private equity funds and perhaps insurance companies to create a market for the assets.

The government would guarantee a floor value as a way to overcome investors’ reluctance to buy the assets, the officials told the paper.

A spokeswoman for the Obama administration did not immediately return a Reuters email seeking comment that was sent outside of normal business hours.

By trying to bring in private sector buyers to set prices for the distressed assets, and to take some but not all of the risk that the asset value will continue to decline, Obama officials evidently hope to restore confidence in the banking system, the paper said.

They will also try to avoid the politically sensitive course of having the government directly buy the assets with public money at prices that could turn out to be far higher, or lower, than their eventual value, the paper added.

The Obama administration on Sunday pushed back until Tuesday the announcement of the keenly awaited bank rescue plan as it pressed lawmakers to settle their differences over a huge economic stimulus package.

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