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Distressed hotel assets find no fast relief in bailout plan. Up to $1 trillion “bad bank” to take toxic assets. No critical details yet.

10 February 2008

Hotel lawyers on the continuing financial crisis. A few minutes ago, on a 61-37 vote, the U.S. Senate approved an $838 billion package to attack the financial crisis. Negotiations will now start to strike a compromise with the House.

Meanwhile, Treasury secretary Timothy F. Geithner’s greatly anticipated unveiling of the administration’s bailout plan details left the markets and many expert’s flat. Expecting more detail on exactly how the plan would work, “investors greeted Mr. Geithner’s speech with dismay and the Dow Jones industrial average shed 300 points” according to the Wall Street Journal.

Here’s what we know.


Detail missing on two critical points.

Lawmakers and investors alike continue to wait for the all important details on how the bailout plan will liberate toxic assets from banks and how to deal with the rise in homeowner foreclosures. The announcement today gave very little detail on either of these 2 critical points. So things continued to drift.

Up to $2 trillion for the program

The program will attempt to focus up to $2 trillion on the financial crisis from a combination of the Treasury, the Federal Reserve.and private investors
Geithner did say that the Treasury plans to devote the $100 billion to the purchase of various securitized consumer loans through the TALF program (Term Asset-Backed Securities Loan Facility), and the Treasury is hoping to leverage this amount up to $1 trillion.

Geithner also said that the administration is exploring a wide range of options for a program to provide a market for real estate related finance. The vehicle will be “a public private investment fund” jointly run by the Treasury and the Federal Reserve, with investment from private investors. This “bad bank” will buy the toxic assets from financial institutions. It will start with $500 billion and ultimately reach another $1 trillion.

Public private venture

The administration is seeking a means to use private capital and private asset managers to provide a market mechanism for valuing the assets. While the program will ultimately provide up to $1 trillion in financing capacity, it will launch with $500 billion. There are no details on how it will begin the process.

Somebody better figure something out soon! This isn’t going anywhere yet.

Other articles on the Global Financial Crisis & Recovery and Outlook & Trends

For other articles about the Global Financial Crisis and where this all takes us, here are some recent articles and links. You can also go to Global Financial Crisis & Recovery and Outlook & Trends on www.HotelLawBlog.com

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $50 billion of hotel transactions and more than 100 hotel mixed-used deals in the last 5 years alone. Who’s your hotel lawyer?

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Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than $50 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.

Jim Butler is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” or “hotel mixed-use” or “condo hotel lawyer” and you will see why.

Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM’s Global Hospitality Group® — a team of 50 seasoned professionals with more than $50 billion of hotel transactional experience, involving more than 1,000 properties located around the globe. In the last 5 years alone, Jim and his team have assisted clients with more than 100 hotel mixed-use projects — frequently integrated with energizing lifestyle elements.

Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.

Contact him at jbutler@jmbm.com or 310.201.3526. For his views on current industry issues, visit www.HotelLawBlog.com.