Public Private Investment Program

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Public Private Investment Program
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What is the Public Private Investment Program?

• Creates Public Private Investment Funds (PPIFs)
  to invest in troubled assets.
• Uses Private Capital to provide a market
  mechanism for valuing those assets.
• PPIP will generate 500 billion in purchasing
  power through 75-100 billion in TARP capital as
  well as capital from private investors, to buy
  legacy assets

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Two Key Elements

• Two key elements of the PPIP Legacy Securities
  Program and the Legacy Loan Program.
• Legacy Securities Program a program to combine
  financing from the Federal Reserve and Treasury
  through the Term Asset-Backed Securities Loan
  Facility (TALF) with equity capital from the
  private sector and the Treasury to address the
  problem of troubled securities

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• Legacy Loans Program a program to combine an
  FDIC guarantee of debt financing with equity
  capital from the private sector and the Treasure
  to support the purchase of troubled loans from
  insured depository institutions.

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Legacy Securities Program

• Legacy Securities Program has two related parts.
• The program is designed to draw private capital
  into the markets for legacy securities by
  providing matching equity capital under the
  Treasurys PPIP and debt financing from the
  Federal Reserve and Treasury under TALF.
• Any private investor will be able to access the
  TALF to purchase legacy securities.
• Goal is to restart the market for legacy
  securities, freeing up economic capital and
  stimulate the extension of new credit.

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• The Treasury and the Federal Reserve are creating
  a lending program targeted at the crippled market
  for legacy securities tied to residential real
  estate, commercial real estate and consumer
  credit.
• By this expansion of TALF, non-recourse loans
  will be made available to investors to fund
  purchases of legacy securitization assets,
• Eligible assets are expected to include
  non-agency residential mortgage backed securities
  (RMBS), commercial mortgage backed securities
  (CMBS) and ABS.

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• In conjunction with these efforts, Treasury
  announced a program to partner with private fund
  managers to support the market for legacy
  securities.
• Private investment managers will have the
  opportunity to apply as Fund Managers.
  Applicants will be pre-qualified upon a certain
  criteria.
• Fund Managers will have a discrete period of time
  to raise private capital and will receive
  matching equity capital from Treasury.

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Legacy Loans Program

• This program will attract private capital to
  purchase eligible loan assets from participating
  banks through the provision of FDIC debt
  guarantees and Treasury equity co-investment.
• The program is intended to increase private
  demand for distressed assets currently being held
  by banks and to facilitate the market-priced
  sales of troubled assets.
• The goal is to cleanse bank balance sheets of
  troubled legacy loans and reduce the uncertainty
  associated with these assets.

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• FDIC will provide oversight for the formation,
  funding and operation of a number of PPIFs that
  will purchase assets from banks.
• Treasury and private investors will invest equity
  capital in Legacy Loans PPIFs and the FDIC will
  provide a guarantee for debt financing issued by
  the PPIFs to fund asset purchase.
• FDICs guarantee will be collateralized by the
  purchased assets and the FDIC will receive a fee
  in return for its guarantee.

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• Banks provide FDIC a list of assets they wish to
  sell.
• FDIC, using outside experts, analyzes the pool
  and determines the debt level the FDIC is willing
  to guarantee.
• An eligible pool with FDIC guaranteed committed
  financing will be auctioned to qualifying bidders
  after a due diligence process.
• Winning bid, combined with FDIC guaranteed debt
  will define the price offered to the selling
  bank.

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• Selling bank must decide whether to accept the
  price. No reserve pricing.
• If sold, the private capital partners will
  control the assets, subject to strict oversight
  from the FDIC.
• FDIC will play an ongoing reporting, oversight
  and accounting role on behalf of the FDIC and the
  Treasury.

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Private Investors

• Private Investors are expected to include
  financial institutions, individuals, insurance
  companies, mutual funds, publicly managed
  investment funds, and pension funds.
• Private Investors must be approved by the FDIC
  and cooperation between Private Investor groups
  will be prohibited once the auction process
  begins in order to maintain fairness.

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ASSETS

• Assets eligible for purchase will be determined
  by the participating banking organizations,
  including the primary banking regulators, the
  FDIC, and the Treasury.
• Participant banks must demonstrate to the
  satisfaction of the Treasury and the FDIC that
  the contemplated asset pools qualify based upon
  the agreed upon minimum requirements.

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