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From Talking Points Memo:
“As we told you last week, the Fed has initiated a program to purchase half a trillion dollars worth of mortgage debt that is purportedly clogging up the credit markets. This is essentially what the TARP program was initially supposed to do — buy back mortgage securities. But they decided not to. And now the Fed is doing something similar, though there are important differences.

They’ve contracted with four financial services firms to manage the money. Under normal circumstances the fees generated by managing that much money could be huge.

Equally important, having these firms manage this money creates huge potential conflicts of interest and opportunities for self-dealing. Just to explain this in the most general terms, the companies holding these securities are sitting on assets worth only a fraction of their presumed value as recently as six months ago. The companies now managing the buy-back are in many cases the same outfits that helped saddle these companies up with these crappy investments in the first place. And they’re the companies likely to be doing business with these companies again once this TARP thing is over. So the managers have all sorts of incentive to make these companies whole as opposed to driving a good bargain for taxpayers.

All of which makes it really important that we know how these four companies were chosen, how they’re being paid and just how the decision-making is taking place.”

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