Public-Private Investment Program

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This page is an under-construction article for the Real Economy Project.

Program details

The PPIP is split into two parts, the Legacy Loan Program and the Legacy Securities Program. See below for a full explanation of these programs.

Financial Crisis Bailout Accounting

For bailout accounting charts see Public-Private Investment Program: Legacy Securities Program and Public-Private Investment Program: Legacy Loans Program

Wall Street Bailout Accounting
(back to main table)
Balance Sheet
Disbursed*: $18.6728B (See PPIP Legacy Security and Legacy Loans Programs)
Current outstanding:
Public Funds
Maximum at-risk: Treasury originally estimated PPIP could generate $500B - $1T in funds, the vast majority of which would be from the FDIC, Fed or Treasury.
Current at-risk: See PPIP Legacy Security and Legacy Loans Programs

* See the methodology and glossary for definitions of "disbursed," etc.



“As originally announced, Treasury, in coordination with FDIC and the Federal Reserve, intended PPIP to improve the health of financial institutions and restart frozen credit markets through the purchase of legacy assets (e.g., legacy loans, CMBS, residential mortgage-backed securities (“RMBS”)). PPIP was intended to involve investments made through multiple Public-Private Investment Funds (“PPIFs”) in two subprograms — one to purchase real estate-related loans (“legacy loans”) and the other to purchase real estate-related securities (“legacy securities”) from financial institutions.”


“In addition to the expansion of TALF, PPIP, as announced, included two subprograms, the Legacy Loans Program and the Legacy Securities Program. The Legacy Loans Program was intended to utilize equity provided by Treasury and debt guarantees provided by FDIC to facilitate purchases of legacy mortgage loans held by banks. On July 31, 2009, FDIC launched a pilot sale of assets as a proposed funding mechanism for the Legacy Loans Program. No TARP funds were used in the sale. The Legacy Securities Program, on the other hand, utilizes equity pro- vided by Treasury and debt potentially provided by Treasury, through TARP, and/or the Federal Reserve, through TALF, to facilitate purchases of legacy mort- gage-backed securities (“MBS”) held by various financial institutions.”

PPIC programs

Legacy Securities Program

The Legacy Securities Program is itself split into the Legacy Securities Public-Private Investment Program (PPIP) and the Term Asset-Backed Securities Loan Facility.

Legacy Securities Public-Private Investment Program

The Treasury Department announced on July 8, 2009 that it would invest "up to" $30 billion of equity and debt in public-private investment funds (PPIFs) established with private sector fund managers and investors for the purpose of purchasing legacy ("toxic") mortgage-backed securities. Initially the program will purchase securities that are:

  • commercial mortgage-backed securities or non-agency residential mortgage backed securities (those that have balances that do not necessarily fall within limits set by the Federal Housing Finance Agency ("FHFA") and do not qualify as collateral for securities that are issued by Ginnie Mae, Fannie Mae, or Freddie Mac);[1]
  • were initially issued before 2009;
  • were originally rated "AAA" - or "an equivalent rating by two or more national recognized statistical rating organizations" - without ratings enhancements; and
  • are secured directly by the actual mortgage loans, leases or other assets.
Administrating firms

In July 2009, the Federal Reserve designated nine financial firms to start PIPP funds.[2][3]

Legacy Loans Program

The Legacy Loans Program (LLP) uses a combination of private and public financing to purchase large pools of "toxic" loans from banks at a price higher than what the market would otherwise offer (a price at which the banks had been unwilling to sell).

The program is operated jointly by the FDIC and the U.S. Treasury, which create public-private investment funds (PPIFs) in conjunction with private investment firms. The private firms put up 50% of the money (and a 50% stake in the PPIF), which is then matched by funds from the U.S. Treasury. The PPIF then issues a debt note that is guaranteed by the FDIC at a 6-to-1 ratio over those funds, leaving a private-public funding ratio of about 12-to-1. The PPIF then purchases a large pool of bad loans from a U.S. bank with the combined private money, U.S. Treasury money and the FDIC-backed debt note. The PPIF then services the loan under the Home Affordable Modification Program (HAMP) until the portfolio is completely liquidated. If the portfolio ends up being worth more than what the PPIF paid for it, then the Treasury and the private investor split the profits 50-50. If it is worse less, then the Treasury and then the FDIC are on the hook for the total debt. The private investor can only lose their initial investment. [4][5][6][7]

For example, the pilot PPIF set up in September 2009 by the program purchased a loan portfolio from Franklin Bank of Houston Texas (a bank already in FDIC receivership) with about $1.3 billion in unpaid balances on residential mortgages. The PPIF purchased the portfolio for about 70 percent of its on-the-books value, with $64.2 million in cash from the private investor, Residential Credit Solutions (RCS), a $64.2 million cash match from the U.S. Treasury, and a $727.7 million debt note from the PPIF guaranteed by the FDIC at about a 6-to-1 ratio over the combined U.S. Treasury and private investor money. This is substantially higher than the 50 precent of book value FDIC officials estimated the loan portfolio would have fetched on the open market.[8][9][10]

Accounting and sources of information

  • $64.2 million from U.S. Treasury
  • $727.7 million in debt guarantees from FDIC
  • The Treasury investment in the PPIFs will count against the $700 billion TARP cap.[11]


U.S. Treasury

Blog posts

Articles and resources

Related SourceWatch articles


  1. SIGTARP October 2009 report, p. 43.
  2. SIGTARP Oct. 2008 report, p. 72

External resources

External articles