Economic Crisis Resource Center > Troutman Sanders LLP

Treasury Announces Public-Private Partnership Investment Program For Toxic Assets

by Troutman Sanders LLP

On March 23, 2009, Treasury announced details of its two-part Public-Private Partnership Investment Program aimed at relieving financial institutions of toxic loans and securities.  The program will use the collective resources of the Treasury, the Federal Reserve, and the FDIC, together with private funding and management, to remove from bank balance sheets whole loans and pre-2009 residential and commercial mortgage-backed securities, collectively referred to as Legacy Assets.  This Public-Private Partnership Investment Program will be funded with $75 – $100 billion in TARP capital in addition to capital from private investors to create $500 billion to $1 trillion in Legacy Asset Purchases. 

The Legacy Loan Program will involve FDIC auctions for pools of eligible whole loans identified by participating banks.  FDIC will provide guaranteed debt financing collateralized by the purchased loans and Treasury will provide equity coinvestment.  Private Asset Managers will control and manage the pools subject to FDIC oversight. 

The Legacy Securities Program will be incorporated into the previously announced Term Asset-Backed Securities Loan Facility (TALF) and will provide nonrecourse debt financing for private sector purchases of pre-2009 residential and commercial mortgage-backed securities originally rated AAA.  Treasury will select up to five asset managers to raise capital and receive matching funds. 

While Treasury’s announcement includes the basic program structure, many details of implementation are still under development by Treasury, the Fed, and the FDIC.  The FDIC has announced plans to release more details in the near future through a process providing for public comment prior to implementation. 

Troutman Sanders will assist clients in all relevant areas and will provide additional information to clients regarding these programs as it becomes available.  Fact sheets involving the program as well as FAQs, Private Asset Manager Applications, and Summary of Terms for Legacy Securities and Legacy Loans are available at:

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