What is a 'Public-Private Investment Program For Legacy Assets - PPIPLA'

The Public-Private Investment Program for Legacy Assets (PPIPLA) is a program designed as a result of the implementation of the Troubled Asset Relief Program (TARP). It was designed to help alleviate some of the strain caused by the existence of legacy assets on banks’ balance sheets during the 2008 financial crisis. With too many of these assets, banks begin to have difficulty attracting investors, and were unable to issue credit to customers at the required rate. The plan was directed at ridding banks of legacy loans and legacy securities, and to sell the legacy assets to both private and public investors who would share in the risk as well as the profits.

BREAKING DOWN 'Public-Private Investment Program For Legacy Assets - PPIPLA'

The Public-Private Investment Program for Legacy Assets (PPIPLA) used $75 to $100 billion in private investor capital and TARP capital to buy legacy assets from banks, with a total of $500 billion in initial purchasing power. In order to maintain a fair selling price, each institution decided which assets to sell, but competing private investors decided the selling price. It was expected that, with proper implementation of the plan, banks would generate sufficient capital to begin extending credit once again.

PPIPLA was based on three fundamental principles:

  1. Maximizing the purchasing power of the taxpayer dollar by combining government and private investor funding to make the most of taxpayer resources;
  2. Sharing profits and risks with participants in the private sector; and
  3. Minimizing the chances of government overpayment for assets by allowing private investors to establish the price of legacy assets available under the program via normal market competition.

How Legacy Assets Were Sold Under PPIPLA

The PPIPLA has two parts, one addressing legacy securities and one addressing legacy loans, both of which made up the troubled legacy assets straining banks financially during the 2008 financial crisis. In order to participate in the program, banks would determine which legacy loans and securities they wished to sell. For example, a bank would choose a pool of legacy loans to sell under PPIPLA. Then, the FDIC would analyze the pool of legacy loans to decide how much funding it could guarantee under the PPIPLA. The pool would then be auctioned off to the highest-bidding private investor, who would be able to access the PPIP to cover half of the costs of purchase. Once sold, private fund managers would manage the assets, under oversight from the FDIC, until the asset was finally liquidated.

RELATED TERMS
  1. Public-Private Investment Program ...

    The Public-Private Investment Program (PPIP) was created during ...
  2. Legacy Planning

    Legacy planning is a financial strategy that prepares a person ...
  3. Troubled Asset Relief Program - ...

    The Troubled Asset Relief Program (TARP) was a group of programs ...
  4. Troubled Asset

    A troubled asset is an asset held by banks, for which there may ...
  5. Congressional Oversight Panel - ...

    Congressional Oversight Panel - COP was created by the U.S. Congress ...
  6. TARP Bonuses

    TARP bonuses were bonuses paid to employees and executives of ...
Related Articles
  1. Personal Finance

    Your Legacy: Tangible and Intangible Wealth

    Passing on your legacy is just as important as transferring wealth to heirs. Consider engaging in these activities to successfully pass on your legacy.
  2. Insights

    4 TARP Recipients That Made A Profit

    New estimates show that the TARP program may show a profit of $23.6 billion over the life of the bailout program.
  3. Insights

    TARP 4 Years Later - How Did It All Work Out?

    The TARP program is estimated to cost taxpayers about $32 billion, much less than the OMB's reported estimate.
  4. Managing Wealth

    Liquidity And Toxicity: Will TARP Fix The Financial System?

    TARP is the government's attempt to forestall a deep, extended recession. Will it work?
  5. Investing

    Cisco's AppDynamics Deal Signals Tech M&A Trend

    Legacy tech firms, sitting on mounds of cash, continue to buy up hybrid and cloud-based competitors.
  6. Managing Wealth

    What Is the Most Important Financial Lesson?

    When it comes to learning lessons about your finances, it helps to think about the future.
  7. Retirement

    Legacy Planning: The Importance of Communication

    Communicating in advance with heirs can help eliminate potential conflict over the legacy you are leaving behind.
  8. Retirement

    3 Methods to use Life Insurance as an Investment During Retirement

    Find out whether life insurance may be a smart investment after you retire, and why it really depends on what you are trying to accomplish.
  9. Trading

    The Power of Program Trades

    Learn how programs make up a significant portion of the volume traded each day.
  10. Retirement

    Does Your Estate Plan Include a Digital Fiduciary?

    What will happen to your social media and email accounts when you die?
RELATED FAQS
  1. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  2. What is an asset?

    An asset is anything of value that can be converted into cash. For companies, an asset might generate revenue, or the company ... Read Answer >>
  3. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
Trading Center