As I discussed as a possibility in a previous post, the Treasury has officially announced its plan to create public-private investment funds (PPIFs) for the purchase of toxic bank assets. The plan calls for five funds with the possibility of more based on the quality of the applications received by the Treasury for the fund manager positions. Details of the plan include private control over fund asset management with FDIC oversight, FDIC guarantees on qualified assets purchased by the PPIFs, a 6-1 leverage limit, and a 50-50 split of private and public fund equity capital. Notably the Treasury has not provided any indication of how the private fund managers will be compensated. Apparently the market is satisfied with the level of detail provided by the Treasury this time around as the Dow is currently up over 250 points. See this link for Treasury Secretary Geithner’s piece about the plan in the Wall Street Journal.
[UPDATE] The Dow has closed with a gain just shy of 500 points.