The U.S. Treasury Department said Wednesday that it has selected nine financial firms as fund managers for a program to remove toxic assets from the balance sheet of troubled financial institutions. The firms selected include BlackRock, Inc. (BLK), Invesco Ltd. (IVZ) and AllianceBernstein, LP (AB). The Public-Private Investment Program, or PPIP, is expected to relieve banks of up to $40 billion worth of the complex securities whose value plunged along with real estate prices and were at the heart of the financial crisis.
However, the program is a scaled-down version of the program that was promoted in March as having the potential to remove $1 trillion in assets that the government originally hoped to take off the banks' balance sheets. This could be partly because the financial situations of several banks have recently improved, which has reduced their need to sell the troubled securities.
In a statement, Treasury Secretary Tim Geithner, Fed chairman Ben Bernanke and FDIC Chair Sheila Bair said, "While utilization of legacy asset programs will depend on how actual economic and financial market conditions evolve, the programs are capable of being quickly expanded if these conditions deteriorate. Thus, while the programs will initially be modest in size, we are prepared to expand the amount of resources committed to these programs."
In June, ten major American banks, including Morgan Stanley (MS), JPMorgan Chase & Co. (JPM) Goldman Sachs Group, Inc. (GS), U.S. Bancorp (USB) and BB&T Corp. (BBT), repaid the capital they received as bail-out funds under the U.S. government's Troubled Asset Relief Program or TARP Capital Purchase Program in October, even though the financial institutions have time until November 9, 2009 to complete the repayment. The repayments by the ten banks were estimated to total about $68 billion. This was viewed as evidence that the financial sector was beginning to stabilize.
The PPIP will leverage private capital with government subsidies so that the investment firms can buy up the soured mortgage-related assets that have made banks reluctant to lend freely to businesses and consumers.
The Treasury said that the selection of the nine firms were made follow a comprehensive two-month application evaluation and selection process, during which over a hundred applications were received to participate in the PPIP.
The nine firms are AllianceBernstein, LP (AB) and its sub-advisors Greenfield Partners, LLC and Rialto Capital Management, LLC, BlackRock, Inc. (BLK), Invesco Ltd. (IVZ), Angelo, Gordon & Co., L.P. and GE Capital Real Estate, Marathon Asset Management, L.P., Oaktree Capital Management, L.P., RLJ Western Asset Management, LP., The TCW Group, Inc. and Wellington Management Company, LLP.
Meanwhile, California-based investment management firm Pacific Investment Management Co., or PIMCO, said it voluntarily withdrew from consideration as a fund manager of the program in early June citing uncertainties regarding the design and implementation of the program. The company was seen as one of the earliest and most ardent supporters of the Treasury program.
Under the PPIP, the Treasury will invest as much as $30 billion and the nine participants may raise a total of $10 billion. The nine firms will be given up to twelve weeks to raise an initial $500 million each from private investors to participate in the program and must also contribute a minimum of $20 million of their own capital. The first closing of a PPIP fund is expected in early August, the Treasury said
The Treasury said that initially, the program will participate in the market for commercial mortgage-backed securities and non-agency residential mortgage-backed securities. In order to qualify for purchase under the program, the securities must have been issued prior to 2009 and also been originally been rated "AAA" or its equivalent by two or more nationally recognized statistical rating organizations. The plummeting value of these securities crippled bank balance sheets and forced them to absorb billions of dollars in losses.
The funds will be able to raise money from investors, including foreign investors and sovereign-wealth funds. However, no single investor can hold more than 9.9% of any one fund.
The Treasury noted that the fund managers have established meaningful partnership roles for minority- and women-owned businesses. These roles include, among others, asset management, capital raising, broker-dealer, investment sourcing, research, advisory, cash management and fund administration services. Collectively, the nine fund managers have established ten unique relationships with these businesses, located in five different states.
The Treasury noted that the nine asset managers also have established partnership roles with ten small, woman-owned and minority-owned financial services businesses. They include CastleOak Securities, LP, Muriel Seibert & Co. ,Inc., Blaylock Robert Van, LLC, and Altura Capital Group, LLC. Every quarter, the Treasury will release information on the ten largest PPIP holdings.
The asset managers named on Wednesday will work on the Legacy Securities Program, which is one half of the original initiative. A second component dealing with whole loans, to be run by the FDIC and known as the Legacy Loan Program, was delayed last month.
However, the FDIC said it is committed to making the Legacy Loan program available as needed "to cleanse bank balance sheets and bolster their ability to support the credit needs of the economy." The FDIC had earlier announced that it will test the funding mechanism contemplated by the program in a sale of receivership assets this summer.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.