The first two public-private ventures that will invest in toxic mortgage-backed securities have been approved by the Treasury Department.
Invesco and TCW Group have raised a combined $1.13 billion and the two investment management firms are now eligible for matching capital from the Troubled Asset Relief Fund.
"Treasury will also provide debt financing up to 100% of the total capital commitments of each Public-Private Investment Fund[(PPIP)], representing $4.52 billion of total equity and debt capital commitments," the department said.
The PPIP program was originally designed to purchase nonagency residential and commercial MBS from banks to clean up their balance sheets. But the banks made it clear they would not sell their legacy MBS at steep discounts. The new and smaller $30 billion PPIF program can purchase MBS from any seller to provide liquidity and facilitate price discovery.
"This program allows Treasury to partner with leading investment management firms to increase the flow of private capital into the market for legacy securities and give taxpayers a chance to share in the profits," Treasury secretary Timothy Geithner said.