Treasury Unveils Toxic Assets Plan

WASHINGTON, DC-The Treasury Department has laid out the details for its long-awaited Public Private Investment Fund this morning. The program will use between $75 billion to $100 billion from TARP funding and then leverage that capital with FDIC and Federal Reserve backing to give the government $500 billion in purchasing power, possibly reaching $1 trillion over time.

Private equity, as has been widely anticipated, plays a key role in the government’s plan to rid banks of toxic mortgage-backed assets. One of the components of the plan is a Legacy Loans Program, in which private capital will purchase troubled legacy loans from banks’ balance sheets through the provision of FDIC debt guarantees and Treasury equity co-investment. Treasury anticipates that approximately half of the TARP resources for legacy assets will be devoted to the Legacy Loans Program.