Investment opportunities in US financial services assets

The Public-Private Investment Program (PPIP) that was announced on 23 March by the US Treasury Department (UST) presents significant opportunities for private investors looking to take advantage of current market uncertainty. The PPIP encourages investment into “toxic” or “legacy” assets, or troubled assets related to real estate. By enabling banks to cleanse their balance sheets of those assets and raise new capital, the government hopes to restore the banks’ liquidity and allow them to resume lending to consumers, homeowners and businesses. Banks insured by the Federal Deposit Insurance Corporation (FDIC) that are not owned or controlled by foreign entities are eligible to participate in the programme.

The PPIP will combine between US$75 and US$100 billion of capital from the UST with private capital and other government financing to generate US$500 billion of purchasing power, with potential future expansion up to US$1,000 billion. The PPIP comprises two separate initiatives: one focused on mortgage loans (legacy loans) and the other on securities backed by illiquid assets, such as residential and commercial mortgage loans (legacy securities).

The FDIC, which is charged with implementing the PPIP together with the UST, has yet to fully define the scope of these initiatives. However, it is already clear that the PPIP offers a rare chance for foreign investors to develop strategic partnerships in the US and earn access to valuable US investment opportunities by providing public capital support.

Waajid Siddiqui is a partner and Hewan Teshome is an associate at Hogan & Hartson in New York. The firm has over 1,100 lawyers in 27 global offices.