Jump Off

I’m surprised this one isn’t making bigger waves over with Mish and the like because it’s kind of funny actually.

From the Globe and Mail:

The Treasury Department is trying to ensure broader participation from hedge funds and other private investors in its bad asset purchase program by loosening the criteria for those who want to take part.

….

The capital requirement was one of three criteria the department listed for evaluating private investment managers when it announced the public-private investment partnership last month. The partnership is intended to spur purchases of distressed real-estate related assets by private investors to remove them from banks’ balance sheets.

….

The three criteria will be viewed “holistically,” the department said Monday, meaning private firms won’t have to satisfy all three. The other two are: a demonstrated ability to raise at least $500-million of new capital and demonstrated experience in investing in mortgage-backed securities.

Some Thoughts

This amuses me because the first requirement is that the companies have at least $10 billion dollars in management but, the Treasury wants to make sure that:

the program is open to small and women- and minority-owned firms.

So, here it seems to be. One must have enough of the following three criteria:

1. $10 billion dollars in management
2. Demonstrated ability to raise $500 million dollars of new capital
3. Demonstrated experience in mortgage-backed securities

Now, they are saying “any set of the three holistically“. Who are they kidding? I mean, this sort of doesn’t make sense to me on any kind of level. But, perhaps I am someone who doesn’t consider a firm with $10 billion dollars in management to be “small” in any kind of way.

The pundits should be having a field day with this one because it’s surreal at best. I know that I have a reputation for saying ‘nonsensical things’ (just ask Danny) but, come on now. What’s the deal here? Are we reasonably going to expect that anyone with experience in mortgage-backed securities will have the intestinal fortitude to go back into it?

And how are they going to make money? By holding the securities for the next fifty years or something?

I tell you that if I had $10 billion dollars in management and the ability to raise $500 million with a few phone calls I probably wouldn’t be running to the real estate.

However

I think there is a Constanza type of play here for someone that would be willing to tie up their capital in this type of investment. It seems too weird on the surface of it to be profitable but, something tells me that in five years or so there may end up being some sort of outrage about how one or two companies ended up with the largest number of holidngs in this arena.

How, I’m not exactly sure but, it srikes me as some sort of arrangement that a company with smart analysts along with capital and connections are going to be able to make a surprising amount of money from an investment that looks, on the surface of it, as being totally ludocris.