Uncertainty reins when it comes to the Treasury’s Troubled Asset Relief Program, or TARP, according to a survey released Friday morning by the Securities Industry and Financial Markets Association. SIFMA, along with four other trade associations that conducted the survey, found that large firms are more likely to participate in selling illiquid assets to the Treasury under the program. Not surprisingly, as well, a current lack of clarity surrounding implementation and terms of asset purchases — if those purchases indeed ever materialize — are significantly affecting firms’ willingness to participate. “Given the breadth of the markets, this survey provides some meaningful direction on where regulators’ tools might be targeted to be most effective, particularly as it relates to providing price transparency,” said Tim Ryan, president and CEO at SIFMA. Among that direction: smaller financial institutions, those with total assets under $5 billion, expressed a strong desire to see the Treasury purchase REO properties via TARP. Forty-nine percent of firms with assets less than $1 billion, and 54 percent of firms with assets between $1 billion to $5 billion, said REO would be among their top three assets to target for sale to the Treasury under the program. Larger firms — those with total assets over $5 billion — were far less focused on REO, however, with just 10 percent of firms ranking it as a priority for TARP. For larger financial firms, much of the focus was on offloading corporate loans to the government via TARP purchases. The survey, which included 445 firms, also found that most firms would look to give priority to the purchase of subprime and Alt-A mortgage assets, split evenly among whole loans and securities. And — shock of all shocks — firms said that they would only really be willing to participate if they could sell their assets at cost, or at the very least at current book value. Firms suggested they’d only sell 9 percent of assets targeted for TARP at current market price,while they’d sell 67 percent of assets if Treasury would pay cost. Smaller financial institutions were even more stark in suggesting they’d only participate if they could sell at cost — only 23 percent said they’d sell at a value based on current book value. Which means that the financial firms surveyed want to sell assets, but only at levels that are well above current market prices. Which brings us back to the simple problem most fund managers that work with potential sellers have: the bid-ask spread is too wide. “It’s almost turning gravity onto its head to say, yeah, we’ll buy [these assets] at cost from you,” said one hedge fund manager, who declined to be named in this story. “Of course anyone in this market would sell at cost if they could, because they know [their assets] are worth far less than that. “There is a market for this stuff, it’s just that none of the sellers want the market price.” The survey, of course, represents what firms want; what terms they’ll actually be offered by the Treasury is, at this point, anyone’s guess. SIFMA is hosting a summit covering TARP on Monday in New York City, and Treasury’s Neel Kashkari, who is the interim manager of the program, is scheduled to speak. Click here to read full survey results. Write to Paul Jackson at [email protected].

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