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.
Treasury on Monday relaxed a requirement that companies have at least $10 billion in capital under management in order to participate, and emphasized that the program is open to small and women- and minority-owned firms.
The department also said it’s extending the application deadline for private fund managers by two weeks until April 24.
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.
Analysts estimate banks hold hundreds of billions of dollars in toxic assets that are causing them to hoard capital and pull back on lending.
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.
The department will match the capital raised by private investors and will provide government guarantees, reducing the risk for private investors.
Treasury also said it will consider opening the investment partnership to other assets besides mortgage-backed securities, but did not provide further details.
Copyright 2009 The Associated Press.