Public-Private Investment Program (PPIP)

The Public-Private Investment Program (PPIP) was a plan made by the U.S. Treasury Department in response to the financial crisis of 2007-2008 to value and eliminate toxic assets from the balance sheets of troubled financial institutions. The Public-Private Investment Program's goal was to make partnerships with private investors to buy toxic assets and restart the market for the mortgage-backed securities (MBS), which made up the bulk of those assets. The program increased liquidity in the market and filled in as a cost discovery device for esteeming troubled assets.

The Public-Private Investment Program can be mistaken for Private Investment Project Procedure (PIPP), yet the last option alludes to an alternate public-private partnership (PPP) that is utilized for the development of public infrastructure.

Breaking Down Public-Private Investment Program (PPIP)

The Public-Private Investment Program comprised principally of two parts: a Legacy Loans Program and a Legacy Securities Program. The Legacy Loans Program utilized FDIC-ensured debt alongside private equity to purchase troubled loans from banks. The Legacy Securities Program, notwithstanding, was intended to utilize funds from the Federal Reserve, the U.S. Treasury and private investors to reignite the market for legacy securities. Legacy securities incorporated certain mortgage-backed securities, asset-backed securities, and other securitized assets that the government considered to be eligible for the program.

The Results of the Public-Private Investment Program

The program is widely seen as a triumph. The Treasury initially committed $22 billion to the program, making nine Public-Private Investment Funds (PPIFs). In declaration to the Congressional Oversight Panel in 2010, then-Treasury Secretary Timothy Geithner expressed that the market discovery and liquidity part of the program helped MBS values increase by 75% in less than two years. The institutional investors brought in money buying the assets for pennies on the dollar, however the Treasury recuperated its full stake in the program as well as an extra $3.9 billion in interest. The Treasury was fully paid out in 2014, and the program participants through the PPIFs can never again make new investments starting around 2012, despite the fact that they were given five extra years to deal with the investments. The program was scheduled to wrap up in December 2017.

The Public-Private Investment Program is considered as a real part of the more fruitful programs inside the overall bailout that happened following the mortgage meltdown. By once again introducing a profit motive to the MBS market and backstopping that market with government guarantees, troubled assets were moved off the balance sheets of the banks and into the arrangement of investors. This permitted the banks to begin reissuing credit and, thus, gave a floor to real estate values in reality. There is dependably an issue of the moral hazard made by this type of intervention, however of the billions conveyed somewhere in the range of 2007 and 2009, the PPIP was one of the best at really having an effect.