Can Ordinary Investors Profit From the Bailout?

If banks are still willing to sell their toxic financial assets, now that mark-to-market rules have been eased, should individual investors have a chance to buy them?

Ronald O'Hanley, head of BNY Mellon Asset Management, thinks so. The question, he writes in a NY Times op-ed piece, is how to do it:

What we need is a not-yet-invented investment vehicle that would enable ordinary citizens to own a piece of the distressed American financial system. The new vehicle would be open to small investors able to commit to a long-term investment. Perhaps the United States savings bond is a useful model, since it compels people to invest for the long-term without a complicated prospectus or offering memorandum. The Treasury auction process is another helpful model, since it enables small investors to buy Treasury bills and bonds at a price set by large investors. Even the Russian voucher system of the 1990s may contain clues, since it allowed individuals to acquire ownership in what had been state-owned enterprises. ***

During World War II the United States sold war bonds to individuals. Today, we are in the midst of a major financial crisis. What we need for this fight are not war bonds but special equities — what we might call “recovery participation equities” representing an ownership interest in a huge pool of troubled assets.