Geithner's Liquidity Programs Look Good for Investors

Like a steak that had been too rare and is now looking scrumptious, the new Public-Private Investment Program (PPIP) from the Treasury Department is starting to look awfully enticing to fixed-income investors. Which is exactly how the federal government likes it.

The PPIP has two parts: a legacy loan program and the legacy securities program. The legacy loan program is being administered through the FDIC (see here) and offers six-to-one leverage to investors. The Federal Reserve is managing the legacy securities program (the Fed does not appear to have a site up for the program yet). It, too, offers leverage to investors, although the exact degree of leverage is not disclosed.

The fact is between PPIP and the TALF, investors are starting to look at some enticing returns. One investor told me his internal calculations put the estimated internal rate of return (IRR) on TALF assets of something in the order of 20% to 30%, which is massive. The IRR on PPIP investments is likely going to be rich for investors, too.

The big dilemma for investors is simply whether they want to bite on the offer considering all the brouhaha over executive pay. If a hedge fund scores a 30% return on TALF investments, will it be able to take their "2 and 20" or is the government going to come in a tax that retroactively at 90%? That's the big question right now. What is not in question is whether the returns will be there, because at first blush they are -- which is why all the bank stocks rallied yesterday.

More Info on PPIP:

• Treasury's PPIP site
• FinancialStability.gov
• FDIC's Legacy Loan Program

Comments

[WMBANZAI7:]

GEITHNER'S PUBLIC PRIVATE TOXIC ASSET TANK
(Fidelity Fiduciary Bank, Mary Poppins)
WilliamBanzai7

Sing along link: www.youtube.com/watch?...

Father, these are private equity investors....

If you invest your tuppence
Wisely in Geithner's public/private toxic asset tank
Safe and sound?
Soon that tuppence,
Safely invested in the toxic asset tank,
Might compound!

And you'll achieve that sense of conquest
As the Fed's non-recourse loans expand
In the hands of the private asset managers
Who invest as propriety demands

You see, you'll be part of
McMansions in the Nevada desert
Vacant subdivisons from Detroit to Fresno
Fleets of repossessed trailer parks
Majestic negative-amortizing Miami coops
Plantations of ripening securitised sub-prime....

All from tuppence, prudently
Fruitfully, frugally invested
In the, to be specific,
Geithner's Federal
Financial Stability
Public Private
Toxic Asset Tank!

Now,
When you co-invest your tuppence in the Feds toxic asset tank
Soon you'll see
That it blooms into equity returns of a generous amount
Semiannually
And you'll achieve that sense of stature
As your NAV expands
To the high financial strata
That established private equity now commands

You can indirectly purchase first and second home equity loans
Think of the foreclosures!
Mortgages! CLOs! CDOs, synthetic CDOs!
Bankruptcies! Debtor sales!

Opportunities!
All manner of public/private enterprise!
Auctioned ALT A! Subprime!
Collateralized liar loans! Securitized no doc SPVs!
Distressed offshore SIVs! Amalgamations! Bad banks!

You see,
Tuppence, patiently, cautiously trustingly invested
In the, to be specific,
Tim Geithner's
Federal Financial Stability
Public Private
Toxic Asset Tank!

Welcome to our joyful family of private investors!!!!!!

Mar 24 05:18 AM