Thomson Reuters Site to Track Bailout Money
A new Thomson Reuters website still in beta attempts to evaluate the performance of government bailouts all over the world.
The site, valuationwatch.net, gathers news and reports from Reuters news feeds, as well as five to ten external sources, about the money governments are spending to solve economic problems and the extent to which these expenditures are having the desired effect.
"Hank Paulson said last year that this isn't a bailout, it's an investment made on the taxpayers' behalf," points out Richard Clements, global head of valuation risk at Thomson Reuters. For instance, where the U.S. government has purchased the preferred stock with warrants of many large financial institutions, some of those banks plan to return the money. "If the preferred stock gets called back at par, the money is paid back, the government still has warrants, and interest has been paid on that preferred stock, then the taxpayer has made his principal back, still owns warrants on these organizations, and has received interest on that money. The ROI is relatively good."
In two months, the site will begin tracking the valuation of troubled bank assets that the government now refers to as "legacy" assets. "If these legacy assets are purchased today, they will recapitalize banks," Clements notes. "Those assets will most likely be purchased at cents on the dollar, but the real intrinsic and future value of those is what they pay back with interest. So say principal gets paid back at 80 cents on the dollar, which means there's a 20% default ratio in those assets. The government has put 70 cents into the system and received 80 cents back and the taxpayer has received a positive return on the investment, not to mention the fact that the interest has also been paid throughout the tenure of these assets. All of a sudden, the government has become an asset manager and its investors are you and me, the taxpayers."
Rather than taxpayers in general, Thomson Reuters has three target audiences for this site. The first is politicians. "One of our main target audiences is Capitol Hill, we want to provide politicians with tools and the understanding of how the money is being invested, how it's being paid back and what the current value is," Clements says.
The second audience is the media; Thomson Reuters would like journalists to reference Reuters news dispatches and charts in their articles.
The third audience the company hopes its new site will reach is its Wall Street clients. "We want to provide tools for them to be able to track information on all these stimulus plans without having to go to 3,000 different web sites," he says. The company would like the site to build brand recognition for its securities valuation services.
How has subprime-related market turmoil affected this valuation business? "We've seen an increase in price challenges from our clients," Clements reports, asserting that Thomson Reuters welcomes such price challenges because they help the company improve its methodology. Specifically for residential mortgage-backed securities, the company has been working not only on getting more granular data about the underlying mortgages, but Clements says he has authored a patent for watching the migratory patterns of pool behavior in these instruments to create better loss and default forecasts.
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