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

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