Geithner Unveils the Public-Private Investment Program

Here’s StockJockey’s take on the Geithner plan.

Geithner Unveils the Public-Private Investment Program

Courtesy of StockJockey at 1440 Wall Street

Treasury Secretary Geithner’s Public-Private Investment Program has been a long time coming – the market was anticipating the unveiling at the end of February, and it is finally upon us. Softening rhetoric on executive pay should combine with Geithner’s plan to spark a rally…lets see how long it lasts.

The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.

The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate. WSJ, Tim Geithner

Geithner explains it all in the Wall Street Journal, which might be a better choice than the New York Times, which botched its first attempt to explain the plan, according to Brad DeLong’s FAQ on the matter.

And note the plan has an unexpected wrinkle – The five new joint venture funds would be able to draw on Fed Talf financing. This is a surprise concession by the Fed, which has maintained that the Talf was to finance new lending rather than legacy assets. FT

Treasury Department Releases Details on Public Private Partnership Investment Program
US Treasury