The Public-Private Investment Program: The Legacy Loans Program (U.S. GFC)

Authors

Ben Henken, Yale School of ManagementFollow

Document Type

Case Study

Case Series

Market Liquidity Programs

JEL Codes

G01, G28

Abstract

On March 23, 2009, the U.S. Treasury, in conjunction with the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC), announced the Public-Private Investment Program (PPIP). PPIP consisted of two complementary programs designed to foster liquidity in the market for certain mortgage-related assets: The Legacy Loans Program and the Legacy Securities Program. This case study discusses the design and implementation of the Legacy Loans Program. Under this program, the FDIC and Treasury attempted to create public-private investment partnerships that—using a combination of private equity, Treasury equity, and FDIC-guaranteed debt—would purchase legacy mortgage loans from U.S. banks by way of FDIC-supervised auctions of them. Despite months of FDIC attempts to develop the program, it was never implemented. The program was criticized by many in the media and academic community for favoring the interests of private investors over those of taxpayers; government officials, however, have contended that these concerns were unfounded.

Recommended Citation

Henken, Ben (2020) "The Public-Private Investment Program: The Legacy Loans Program (U.S. GFC)," Journal of Financial Crises: Vol. 2 : Iss. 3, 307-325.
Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol2/iss3/12

Date Revised

2020-10-08