BlackRock, Carlyle Support Geithner’s Toxic Debt Plan
The U.S. plan to relieve banks of real estate debt won initial support from investors, who set aside for now questions about asset pricing and whether they will be demonized for profiting from the financial crisis.
“This is not a panacea; it is not a silver bullet,” Laurence Fink, chairman of BlackRock Inc., the largest publicly traded U.S. asset manager, said today in an interview. “But this will take some of the overhang out of the marketplace. It is incrementally a really good thing.”
The Obama administration said today it’s counting on investors such as New York-based BlackRock, hedge funds and private-equity firms to buy devalued real estate loans and mortgage-backed securities from banks so they can raise capital and resume lending. The government aims to spur as much as $1 trillion in purchases by providing $100 billion in capital, as well as financing from the Federal Reserve and Federal Deposit Insurance Corp.
Financial markets rose on speculation the plan will help end the first global recession since World War II. Blackstone Group LP and Fortress Investment Group LLC, New York-based private-equity firms that have said they are interested in increasing their holdings of distressed debt, jumped 24 percent and 37 percent, respectively, in New York Stock Exchange composite trading. BlackRock gained 18 percent.
“This ambitious program is structured in a way to attract private capital and help banks sell distressed or toxic assets,” said David Marchick, head of government and regulatory affairs at Washington-based Carlyle Group, a closely held private-equity firm.
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