The Public-Private Investment Program: The Legacy Securities Program (U.S. GFC)

26 Pages Posted: 26 Oct 2020 Last revised: 27 Aug 2021

See all articles by Ben Henken

Ben Henken

Yale School of Management - Program on Financial Stability

Date Written: October 10, 2020

Abstract

On March 23, 2009, the U.S. Treasury, in conjunction with the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC), announced the Public-Private Investment Program (PPIP). PPIP consisted of two complementary programs designed to foster liquidity in the market for certain mortgage-related assets: The Legacy Loans Program and the Legacy Securities Program. This case study discusses the design and implementation of the Legacy Securities Program. Under this program, the Treasury formed an investment partnership with nine private sector firms it selected at the conclusion of a months-long application process. Using a combination of private equity and debt and equity from the Treasury, nine public-private investment funds (PPIFs) invested $24.9 billion in non-agency residential and commercial mortgage-backed securities (MBS), netting the government a positive return of $3.9 billion on its investment. While the program received mixed reviews from scholars, the private sector, and former government officials, it is seen as having contributed somewhat to the recovery of the secondary mortgage market.

Keywords: Public-Private Investment Program, PPIP, Legacy Securities Program, TARP, U.S. Department of the Treasury, FDIC, mortgage-related assets, toxic assets, asset purchase program

JEL Classification: G01,G28

Suggested Citation

Henken, Ben, The Public-Private Investment Program: The Legacy Securities Program (U.S. GFC) (October 10, 2020). The Journal of Financial Crises: Vol. 2 : Iss. 3, 326-351., Available at SSRN: https://ssrn.com/abstract=3717271

Ben Henken (Contact Author)

Yale School of Management - Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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