Timothy G. Massad
of the tools the Treasury Department used to respond to the financial crisis
reached an important milestone recently when Treasury recovered the last of its
investments in the Public-Private Investment Program, or PPIP. This was one of the critical programs
Treasury used to unfreeze the markets that provide credit to American families
the financial crisis reached its peak, banks were not making new loans to businesses, or even to one another. Businesses
could not get loans for new investments.
Municipalities and state governments could not issue bonds at reasonable
rates. And families could not get
credit. The securitization markets—which
provide financing for credit cards, student loans, auto loans, and other
consumer loans as well as small business loans—had basically stopped
functioning. The economy was contracting
at an accelerating rate.
was why Treasury launched several programs to help unfreeze these markets and
bring down the cost of borrowing for families and businesses. A key program was PPIP, which was designed to
help restart the market for mortgage backed securities. It worked alongside the Term Asset Backed
Securities Loan Facility, or TALF, a program launched with the Federal Reserve
that was designed to help restart the market for auto loans, student loans, and
other types of consumer loans. A third
Treasury credit market program was focused on the financing needs of small
businesses. Together, these programs
allowed banks and other financial institutions to re-deploy capital and extend
new credit to households and businesses.
it was launched in March 2009, PPIP has helped restore the availability of
credit by facilitating the purchase of troubled legacy mortgage-backed securities.
It did so by providing financing on
attractive terms to several funds created specifically for this purpose, in
which the government partnered with private investors. The purchases by these funds helped improve
the liquidity and prices of these securities.
This helped bring private capital back to these markets, which in turn
increased the availability of loans to families and businesses.
the program, Treasury originally committed $22.4 billion of equity and debt financing
to the PPIP funds, and ultimately disbursed $18.6 billion. With the Oaktree fund’s final equity repayment
last week, Treasury has now recovered all of its PPIP debt and equity investments. Moreover, as of June 19,
2013, Treasury has earned a net positive return of $3.7
billion through interest and additional proceeds. The remaining payments
will provide the taxpayers with an additional positive return on their
The repayment of the last PPIP equity
investment is one part of Treasury’s larger effort to wind down the remaining
TARP investments. Treasury has already
recovered nearly 95 percent ($398.15 billion) of the funds disbursed through
TARP ($419.97 billion) to date. Excluding
disbursements for the housing programs and including the proceeds from sales of
all Treasury AIG shares, Treasury disbursed $411.72 billion for all TARP
investment programs and has now collected $415.71 billion.
course, the main measure of our success is not how much of a return we made on
these programs, nor can any such return ever compensate for the terrible cost this
crisis inflicted on American families and businesses—a cost reflected in the
millions of lost jobs, foreclosed homes, retirements postponed, and lost
savings. There is still considerable
work left to be done to fully recover from this crisis and strengthen our
growth. But the damage would have been
far worse, and the costs far higher, without the government’s forceful
the height of the financial crisis, few Americans would have believed that the
taxpayers would be close to recouping the total value of the amount extended to
prevent another Great Depression so quickly. So when we cross certain milestones like the PPIP
repayment, it is important to take stock of how far we have come from the days
of widespread financial panic. And it
should remind us that our government can still tackle enormous challenges when
we work together to solve problems.
G. Massad is Assistant Secretary for Financial Stability at the U.S. Department