Regulators Trying to Forge a Main Street, Wall Street Alliance

As part of its sweeping plan to purge banks of troublesome assets, the Obama administration is encouraging several large investment companies to create the financial-crisis equivalent of war bonds: bailout funds.

The idea is that these investments….would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars.

The potential risks — politically for the administration, and financially for would-be investors — are considerable.

But, as with any investment, there are risks. If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses. Nonetheless, the administration and executives in the financial industry are pushing to establish the investment funds, in part to counter swelling hostility against the financial industry.

The new funds are still under discussion, and they are unlikely to be established for several months….. But if indeed the plans go through, individuals too could participate in the funds by investing just a few hundred dollars.

If selected, money managers like BlackRock (BLK) could begin a fund within weeks. Pimco, Legg Mason and BNY Mellon Asset Management have also expressed interest in starting retail investment funds to participate in the government’s plan. [via NYT]

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