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Firms Hired By Fed To Manage Our Assets Won't Say How Much They're Being Paid
So, how much are the four firms hired to manage the Fed's mortgage-backed securities purchase program getting paid for their work, and how did they get the contracts in the first place?
They're not saying.
We called Blackrock Inc., Goldman Sachs, Wellington Management, and PIMCO to ask them about their recently announced contracts to manage a total of $500 billion worth of mortgage-backed securities, on behalf of the Federal Reserve. Spokespeople for the first three firms told us they were referring all questions to the Fed. Representatives for PIMCO -- whose founder said in September that his firm would manage a very similar Treasury program for free, out of patriotic duty -- have not responded to two messages.
A spokesman for the New York Fed told TPMmuckraker he'd get back to us with more information.
"The selection of these managers seems incredibly opaque," Jeffrey Gundlach, the chief investment officer for the invesment firm TCW, and an expert in mortgage-backed securities, told TPMmuckraker.
Indeed, the Fed has so far provided little detailed information on the process by which these firms were selected. In a fact sheet posted on their website, the Fed wrote:
Because of the size and complexity of the agency MBS program, a competitive request for proposal (RFP) process was employed to select four investment managers and a custodian ... The selection criteria were based on the institution's operational capacity, size, overall experience in the MBS market and a competitive fee structure.
We'll keep you posted on what we learn from the Fed...
| TOPICS: Bailout, Ben Bernanke, Federal Reserve, PIMCO, Wall Street
Josh
Zachary
"the agency MBS program"
What MBS program? Why does the Fed own or control MBS instruments?
TARP was once supposed to be to buy "toxic assets" which might then need to be managed. But that wouldn't be the Fed anyway, that would be the Treasury, right?
The Fed has loaned money against corporate paper. Has the Fed been taking MBS instruments as collateral, and the borrowers defaulting??
What the heck is going on?
January 2, 2009 2:22 PM | Reply | Permalink
SSDD.
Why would we expect things to change in the Bush Administration while he is still in office. It is only after he leaves office that things will change. I hope.
January 2, 2009 2:28 PM | Reply | Permalink
I had completely forgotten about the Fed program announced about a month ago. Yikes, so much for memory in the new year!
January 3, 2009 5:05 AM | Reply | Permalink
Eds:
In response to your question: "What is going on?"
What is happening is that the Democrats have bought into the bogus idea that debt creates wealth.
They are desperately spending future tax dollars to shore up current spending.
It is the ultimate ponzi scheme involving trillions of dollars which, when this bubble bursts, will leave the USA, and Americans like you and me, totally broke.
The only way to improve an economy - yours, mine, or the governments, is to reduce spending and increase income. Doing the opposite - increasing spending while reducing income can only make the problem worse.
.
January 5, 2009 7:32 AM | Reply | Permalink
Odd that the Southern Caucus Senators has not forced these "Asset managers" into any sort of concession for their taxpayer bail-out..no such accountability, don't seem to be interested in what the white collar managers are reaping in wage and benefits..not a word..unlike the constant low pitched howl while lying about wage and benefits, and forcing the UAW "blue collar" workers into major concessions....I am sick of that bunch in Congress...both parties...its time "we the people" bust their Congressional UNION...lower their wages..cut their benefits...steal their pensions...
January 2, 2009 2:26 PM | Reply | Permalink
RIGHT ON!!!!
January 2, 2009 2:30 PM | Reply | Permalink
I believe the correct terminology is "Plantation Caucus."
January 2, 2009 3:16 PM | Reply | Permalink
No unions to bust. That's all.
January 2, 2009 7:18 PM | Reply | Permalink
Isn't it something of a conflict of interest to allow Goldman Sachs to run things for the government?
Shouldn't everyone in Congress be screaming about the complete lack of promised oversight and transparency?
(Oh, yeah: they bought into the entire WH spin on this, and are convinced that actually doing their f*cking job is somehow an act of terrorism or illegal or something else that they can't explain or talk about.)
January 2, 2009 2:42 PM | Reply | Permalink
Just a guess but they're probably getting .50% of assets. Which is a big chunk of change.
January 2, 2009 2:49 PM | Reply | Permalink
With the stipulation this is under the Bushco Regime, the Federal Acquisition Regulations generally required pre-bid, bid, award and post-award contracts be available for public viewing.
January 2, 2009 3:22 PM | Reply | Permalink
I hate to sound like a Monday morning quarterback, but this was clearly coming down the pike from the minute Paulsen started talking about acquiring these "assets." Who else was going to handle this stuff? The Fed certainly wasn't staffed to do it. So the same folks who got rich creating the mess get to become richer as they purport to clean it up. And how will they do that? By repackaging and re-securitizing these dogs all over again. Yes, there will be new bells and whistles and more "overcollateralization" to address the perceived problems with the current assets. But mark my words - the same crowd of funds and underwriters will find new ways to make money off this stuff by buying them from the Fed - at bargain prices - and issuing a new generation of securities.
January 2, 2009 3:38 PM | Reply | Permalink
You hit the nail on the head. Since the people who created these financial instruments claim they didn't 'really' understand them, I don't know how any of the remaining non-regulators with the fed would be able to do so.
The financial markets were swiriling the drain, but now the taxpayers are the ones heading down the sewer pipe.
January 4, 2009 7:40 PM | Reply | Permalink
Under the rubric of "its better to light one small candle then to cuss the dark " my lovely wife spent the day today transferring all of our accounts from Bank of America to A Plus Credit Union -
And now we pray that Team Obama can bring some reasoned oversight to what really does look like a looting of our national treasury -20th Jan cannot arrive a moment too soon !
January 2, 2009 8:32 PM | Reply | Permalink
Do any of these fools read, and are any of them capable of simple math. The entire Wall Street predator class derivatives, CMO,CBO,Credit Default Swap process are ponzi schemes'. The entire system has collapsed. The oldworld irredeemable debt fictions and Ponzi scheme's lay dying and rotting in the field. Trillions of paper dollars were majikally conjured out of the myst, and now there will be a great unwinding, a balancing and a reckoning, as all the paper wealth is deleveraged and revalued. We are talking about hundreds of trillions of dollars that must be drawndown, or erased from the system. Print money to your cold hard hearts content. Heap trillions of dollars of debt onto the shoulders of America's children born and unborn, - but all the kings horses, and all the kings men can never put this irredeemable debt economy back together again.
Ashes, ashes, all fall down.
January 3, 2009 1:36 AM | Reply | Permalink
I may be incorrect in this but if the selection was made through an RFP process, those bids should be available through a FOIA request.
Quite frankly, having written responses to Federal RFP for a while, I can't see any one of those outfits getting the information necessary to respond in such a short time. But then, they have legions of attorneys and administrative types...not like small businesses such as ours.
January 3, 2009 4:46 PM | Reply | Permalink
Complete transparency from the FED is not reality – it is hard to provide complete transparency when you don’t know what you are really doing. I wish I can run my business sometimes like the FED or our Government – better yet I wish I could get a blank check that I don’t have to pay back – then I can market http://www.bidmycleaning.com across the entire nation without coming out my pocket.
January 3, 2009 7:23 PM | Reply | Permalink