Treasury to seek out money managers for bailout help


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Bailout trickle-down: BlackRock Inc., Pimco and Legg Mason’s Western Asset Management unit served as informal advisors to the Treasury on the $700-billion financial-system rescue plan and now are offering to manage some of the assets the government will buy from banks, Bloomberg News reports, citing people familiar with the matter.

The Treasury will choose five to 10 money managers to help it buy and manage troubled mortgage debt, officials reiterated today, according to Bloomberg.


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The Treasury’s first attempt to hold an auction to buy troubled assets from financial firms will take at least four weeks to set up. Managers will be evaluated based on the cost and scope of services they offer. The Treasury is still working out a conflict-of-interest policy and details for guidelines on compensation.

BlackRock, Pimco and Western Asset all are veteran bond-fund managers. BlackRock is in New York, Pimco is in Newport Beach and Western Asset is in Pasadena. Spokesmen for the companies declined to comment.

What everyone’s waiting to see, of course, is the pricing scheme Treasury and its advisors set up for loan purchases. How much is this mortgage dreck really worth if, like Uncle Sam, you’re planning to hold it for years rather than days?

Separately, the Treasury today hired State Street Corp. and Barclays PLC to manage a previously announced $10-billion program to buy mortgage-backed securities of Fannie Mae and Freddie Mac -- an attempt to lend support to that market and bring down mortgage rates.

Thankfully, there’s no shortage of out-of-work Wall Streeters available for hire as the Treasury morphs into a giant hedge fund.