Corporate Welfare

Treasury Announces Team PPIP


The Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation have put out a fairly detailed plan for the Public Private Investment Program. Handicappers' favorite Pimco did not end up among the private sector buyers in the program, who are listed here:

AllianceBernstein, LP and its sub-advisors Greenfield Partners, LLC and Rialto Capital Management, LLC;
Angelo, Gordon & Co., L.P. and GE Capital Real Estate;
BlackRock, Inc.;
Invesco Ltd.;
Marathon Asset Management, L.P.;
Oaktree Capital Management, L.P.;
RLJ Western Asset Management, LP.;
The TCW Group, Inc.; and
Wellington Management Company, LLP.

Upshot: The "Legacy Securities" portion of the program is still viable. In this program, the government will support the buying of troubled asset-backed securities. Treasury will sink 30 billion of your dollars into supporting the purchase of "legacy assets." That's down from the $50 billion expected a few weeks ago, and the cool trillion that was rumored back in February.

Three joyless paragraphs toward the end of the release treat the "Legacy Loan" portion of the program, which was supposed to have died but continues to shamble along. Under Legacy Loan, straightforward loans that are not securitized would be taken off banks' balance sheets. No money is allocated for this portion of the program, and the plan seems to be to kick the Legacy Loan portion into the future without killing it.

Some corrections on my previous PPIP post: The FDIC regulatory proposals referred to at the end deal with purchases of failed banks from the FDIC, not troubled assets. (The FDIC does sell troubled assets from both failed and rescued banks, but those are not covered in these regs.) An FDIC spokesman says the corporation has been able to find buyers for all 52 banks that have been liquidated this year, so my smartass remark about the wrong way to bring customers into the store is off-base.