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Alternative Market Briefing

New York Roundtable: HF managers are afraid to even touch TALF or PPIP, which seem shrouded in uncertainty

Wednesday, July 01, 2009

By Benedicte Gravrand, Opalesque London:

One of U.S. Treasury Secretary Timothy Geithner’s initiative, called the Public-Private Investment Program, or PPIP, has lost momentum, reported the Wall Street Journal on Monday, as big banks are worried about having to sell at fire-sale prices while small banks fear they would be shut out. Potential buyers balk at the risk of doing business with the government, concerned that politicians might demonize them for making big profits (coverage).

On March 23, 2009, the FDIC, the Federal Reserve and the U.S. Treasury announced the Public-Private Investment Program for Legacy Assets - which is designed to provide liquidity for toxic assets on the balance sheets of financial institutions. It is part of the Troubled Asset Relief Program (TARP) as implemented by Geithner. The major stock market indexes in the U.S. rallied on the day of the announcement.

PPIP has two parts, addressing both the legacy loans (which has since been postponed) and legacy securities (which is apparently still going ahead). The funds are meant to come from TARP monies, private investors, and from loans from the Federal Reserve's Term Asset Lending Facility (TALF).

Large banks, which had positive revenues in Q1-200......................

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