This article was originally published 25 March, 2009
On March 23, 2009, the Department of the Treasury released more information regarding its new Public Private Investment Program, or "PPIP." While Treasury's announcement still leaves many specifics to be determined, including the timeline for implementing the PPIP, the outlines of the program are now in sharper focus. The following discusses the highlights of Treasury's announcement.
- General
The PPIP contemplates the establishment of public-private investment funds, or "PPIFs," to purchase legacy loans from insured depository institutions and legacy securities from certain financial institutions and will include either FDIC-guaranteed or Treasury-provided financing, as well as Treasury co-investment, to encourage investor participation. The PPIP will consist of two programs – one for legacy loans (the "Legacy Loans Program") and one for legacy securities (the "Legacy Securities Program"). The Legacy Loans Program will be administered by the Federal Deposit Insurance Corporation, and the Legacy Securities Program will be administered by Treasury. Under the Legacy Loans Program,U.S. depository institutions will sell loan pools through an auction process to newly-formed PPIFs. The PPIFs will be jointly owned by the winning bidders and Treasury, will be managed by the winning bidders under FDIC oversight and will be eligible for FDIC-guaranteed financing. Under the Legacy Securities Program, PPIFs created with both private investor equity and Treasury equity and managed by approximately five pre-qualified fund managers will purchase mortgage-backed securities from a broader range of financial institutions, and subject to certain guidelines and restrictions, the PPIFs will be eligible for Treasury-provided financing. Legacy Securities Program PPIFs will also have the opportunity to obtain additional financing from the Term Asset-Backed Securities Loan Facility ("TALF"). The PPIP contemplates using between $75 and $100 billion of funds authorized and appropriated under the Troubled Asset Relief Program ("TARP") for the equity co-investments by Treasury in both programs. Treasury has not yet specified how the TARP funds will be allocated between the two programs, but it is expected that the TARP funds will be split on a roughly equal basis.
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