Let Us In

If the Administration needs help in sorting out all these toxic assets and getting them off the banks' balance sheets, why not enlist the American people and their wide purchasing power? In short, if the investing opportunity offers plenty of upside and no downside, why can't any individual participate?

If Geithner’s taxpayer subsidized toxic public/private plan goes forward, I think it would be fair if the federal government allow non-institutional investors to participate via a no-fee investment vehicle. I think if Americans had the option of investing in this program (without having to pay the egregious fees to the investment advisors/PE shops), it would be much easier to swallow since they would at least get the same deal the sharks are getting. There is probably more money on the sideline with individual investors than all these institutional investors. Maybe they could set up some ETF equivalent for it. I think the willingness of the administration to do such a thing would tell us a lot about whose for whose interest they are really looking out.

Via Kevin Drum, it looks like some of the institutional investors will offer the opportunity:

Two of the country's biggest money managers — Newport Beach-based Pacific Investment Management Co., known as Pimco, and New York-based BlackRock Inc. — say they may launch funds that would allow individuals to have a stake in some of the bad assets to be purchased from banks.

....Bill Gross, co-chief investment officer at Pimco, said his firm was looking into the idea of creating mutual funds that would tap into the program. BlackRock is doing the same, said Curtis Arledge, co-head of fixed income at the firm.

You may ask why individuals would want a share of toxic assets, and I'm not saying I'd call it a definite buy opportunity. But the principle is that a sweetheart deal for Wall Street could easily be turned into a sweetheart deal for everyone. Investors put up only 6 cents on the dollar, and yet they get to split the profits with the government 50/50. You don't find many deals like that every day. Opening the deal up would also reduce the suspicion that taxpayer money is just bailing out banks and enriching wealthy investors. It would enrich other investors, too! Now, there's still a dividing line between the investor class and the working class, but if pension funds could get involved, etc., at least some of this money would flow down to the worker.