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Treasury Extends Deadline, Eases Terms to Buy Toxic Assets

Treasury said today that it's extending its deadline to buy toxic assets from troubled financial institutions and is lowering the capital requirement for participation.

Firms now have until April 24 to buy the toxic assets -- such as mortgage-backed securities based on defaulted mortgages that have been poisoning bank balance sheets.

Also, the feds had said that, in order to participate in the purchase program, buyers had to have at least $10 billion of capital under management, one of three strict criteria laid out when the program was announced last month. (The other two: an ability to raise $500 million of new capital and experience handling such assets.)

Today, however, Treasury said that all three requirements need not be met. Instead, applications will be looked at "holistically," Treasury said today.

Treasury says that it's relaxing the program to get broader participation and emphasized it's open to firms owned by women and minorities.

Another way to look at it: Treasury might not be getting enough takers so far.

There is an attraction to buying the toxic assets: You'll be able to buy them at pennies on the dollar and they are effectively backed by the federal government. You're betting they will regain their value at some point in the future and you'll be able to make a profit on them.

The fear: They will not sufficiently appreciate in the future and you'll get back your initial investment and that's it, making them hardly worth your time.

-- Frank Ahrens
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By Frank Ahrens  |  April 6, 2009; 12:42 PM ET
Categories:  The Ticker  | Tags: Treasury, toxic assets  
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