It received much fanfare, speculation and criticism when it was first introduced both in February and in March. Now, the Private Public Investment Program (PPIP) is about set to launch. Secretary Geithner first talked about this in February. When he made his initial speech on the matter,
he was very vague and general. The market proceeded to plunge four hundred points in the aftermath. Secretary Geithner came back in
March with a much more detailed plan and the market responded more favorably. The plan is extremely complicated and it's ultimately unclear if it will work. It has also since gone through a major rework. The PPIP is the Treasury's plan to try and get so called "toxic assets" off the books of banks. Removing these so called "toxic assets" (very poorly valued Mortgage backed securities for instance) was one of the center pieces of the administration's economic recovery. It would allow for an auction among selected hedge funds and other private financial firms to buy these "toxic assets. The private firms would put up some of their own money and the federal government would loan the rest. (as such the public private investment) Now, it's just about ready to
launch. The PPIP has gone through a long gestation process, interviewing many prospective investors and scaling back its scope, which at one point was hailed as a $1 trillion endeavor. It now looks to do business worth around $50 billion.
Markets initially rallied when Treasury Secretary Timothy Geithner announced back in March, a two-pronged plan to offer government financing to lure investors into buying bad loans and toxic securities from banks.
Originally, the program was supposed to be worth near one trillion dollars. Some estimates put "toxic assets" at near five trillion dollars. Clearly, what we have now won't resolve much of anything. I can only hope and assume that the Treasury has decided to roll it out in a small way to see how it works. If so, that might be wise. This plan is terribly complicated and rolling it out all at once could spell disaster. Still, given the enormous amount of toxic assets banks hold, it's easy to see just how difficult this task will be given they are only rolling out $50 billion for now.
What's much more curious is the list of hedge funds involved in the PPIP. There are reported to be nine and those nine includes GE Capital. It's frankly nothing short of uncanny how often GE, and its subsidiaries, are on the receiving end of a favorable Obama program. It's no secret that both MSNBC, CNBC, and NBC, all GE affiliates, have given President Obama very favorable coverage. Now, we have another example of GE receiving a favorable business deal from the administration.
In April, Bill O'Reilly featured this Talking Points Memo about a GE subsidiary that would stand to benefit handsomely from cap and trade.
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