West Palm Beach (HedgeCo.net) – The Treasury Department said that they have recieved 100 applications from potential fund managers interested in participating in the Legacy Securities portion of the Public Private Investment Program (PPIP).

A variety of institutions applied, including traditional fixed income, real estate, and alternative asset managers, such as hedge funds.

Successful applicants must demonstrate a capacity to raise private capital and manage funds in a manner consistent with Treasury’s goals, they must have experience investing in eligible assets and headquartered in the United States.

Applicants can expect to be informed of their preliminary qualification around May 15, 2009, when they can begin raising a minimum of $500 million in private capital that will serve as the investment that, pending further approval, will be matched with taxpayer funds.

Since announcing the program details on March 23, the Treasury has encouraged small, veteran, minority and women owned private asset managers to partner with other private asset managers. On April 6, Treasury extended the deadline for fund manager applications to provide more time to facilitate these types of partnerships.

Tags: accredited-investors, alex, eligible assets, fixed income, fund-managers, hedgeco, investment program, legacy-securities, manager applications, nbsp, palm-beach, private asset managers, private capital, private investment, program details, taxpayer funds, treasury-department, types of partnerships, west palm beach

New York (HedgeCo.Net) – The Obama administration has unveiled its much anticipated program aimed at clearing toxic assets from the books of U.S. banks and finding a middle ground between inaction and nationalization.  By financing the purchase of up to $1 trillion in illiquid real estate assets, the government is hoping that its Public-Private Investment Program will revive the lending process while helping to jumpstart the economy.

“This will allow banks to clean up their balance sheets,” Treasury Secretary Timothy Geithner said.  “There is no doubt the government is taking risk.  You cannot solve a financial crisis without the government assuming risk.”  

The plan entails using up to $100 billion in the Troubled Asset Relief Program funds along with additional capital from private investors to “generate $500 billion in purchasing power to buy legacy assets with the potential to expand to $1 trillion over time,” according to a statement released by the Treasury.

Under the plan, the “Legacy Securities Program” would be instilled to protect private investors’ or hedge funds’ purchase of the assets by using money from half of the original funds.  The Treasury would match any private capital that is raised for the purchases dollar for dollar.

The Federal Deposit Insurance Corporation would oversee a facet of the plan called the “Legacy Loans Program,” which is expected to garner interest among many private investors.  With this program, the treasury would pony up half of the capital to purchase a bundle of loans while the rest of the cash would come from private investors or hedge funds.  The FDIC would then guarantee financing of up to six times the original price, then auction off the loans.

In addition, private-sector purchasers would determine the value of these assets so as to quell any fears that the government might be overpaying for the loans.

Some critics are weary that the program’s success relies exclusively on the action of private investors to step up to the plate.  The Fed’s new program to revive consumer credit, called the Term Asset-Backed Securities Loan Facility, or TALF, was a disappointment as far as popularity was concerned, with just 19 large hedge funds and other firms showing interest.  Out of the $200 billion offered, only $4.7 billion in requests for loans came in.  

Another reason cited for the lack of big-money interest in the programs is the mess that unfolded after AIG handed out $165 billion in employee bonuses.  A near unanimous vote in the House to tax those bonuses 90 percent may have stifled public outcry, but it did little to put to rest investor’s uncertainty regarding the government’s conflicting actions.  

Former President Bush declined to buy the toxic securities in November.  No banks have agreed as of yet to sell their illiquid assets.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Tags: balance sheets, deposit insurance corporation, estate assets, fdic, federal deposit insurance, federal deposit insurance corporation, hedgeco, inaction, investment program, legacy assets, nationalization, no doubt, private capital, private investment, private investors, purchasing power, timothy geithner, treasury-secretary

Bloomberg – The Obama administration will announce details of a plan today to expand the $700 billion rescue of the financial system that will rely on enticing private investors to buy the troubled assets clogging banks’ balance sheets.

Treasury Secretary Timothy Geithner, who will unveil the Public Private Investment Program today, has crafted an approach using up to $100 billion of bailout money to spur investment funds to purchase — and banks to unload — the illiquid securities and loans that have caused credit to dry up. The Treasury, Federal Reserve and the Federal Deposit Insurance Corp. will all play a role alongside private investors in aiming to buy between $500 billion and $1 trillion of troubled assets.

“By providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets,” Geithner said in an op-ed piece published in today’s Wall Street Journal. “The ability to sell assets to this fund will make it easier for banks to raise private capital.”

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Tags: asset values, bailout, balance sheets, bank balance, ed piece, federal deposit insurance, federal-deposit-insurance-corp, federal-reserve, illiquid securities, investment program, investment-funds, private capital, private investment, private investors, timothy geithner, treasury-secretary, trillion, troubled assets, wall street, wall-street-journal