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

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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 Loans Program. Under this program, the FDIC and Treasury attempted to create public-private investment partnerships that--using a combination of private equity, Treasury equity, and FDIC-guaranteed debt--would purchase legacy mortgage loans from U.S. banks by way of FDIC-supervised auctions of them. Despite months of FDIC attempts to develop the program, it was never implemented. The program was criticized by many in the media and academic community for favoring the interests of private investors over those of taxpayers; government officials, however, have contended that these concerns were unfounded.

Suggested Citation

  • Henken, Ben, 2020. "The Public-Private Investment Program: The Legacy Loans Program (U.S. GFC)," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 2(3), pages 307-325, April.
    • Handle: RePEc:ysm:ypfsfc:231212
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1074&context=journal-of-financial-crises
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    Keywords

    Public-Private Investment Program; PPIP; Legacy Loans Program; TARP; U.S. Department of the Treasury; FDIC; mortgage-related assets; asset purchase program;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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