Fallout: The Financial Crisis

P-PIP program’s a little less ambitious

Ashley Milne-Tyte Jul 1, 2009
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Fallout: The Financial Crisis

P-PIP program’s a little less ambitious

Ashley Milne-Tyte Jul 1, 2009
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TEXT OF STORY

BOB MOON: The financial crisis has spawned a whole range of programs trying to stimulate a recovery. But the P-PIP has to be the most exotic. That’s short for the Public-Private Partnership, where the government encourages private investors to buy troubled assets. The program was announced with much fanfare in March. And there’s talk the Treasury could finally roll the P-PIP out today. But as Ashley Milne-Tyte reports, it’s already looking a lot less ambitious than when it was originally launched.


Ashley Milne-Tyte: The original plan was aimed at buying everything from loans to bonds to mortgages that had been sliced and diced and sold as asset-backed securities. Now it’s those securities that’ll be the focus of the plan.

David Beim is a finance professor at Columbia Business School. He says the Treasury seems ready to try the P-PIP on a small scale to see if anything works.

DAVID BEIM: The real question is can you find trades that sellers will be willing to sell at and buyers will be willing to buy at, and maybe the answer is no.

Right now the market’s locked. The banks holding the securities won’t drop their prices and buyers think assets are too risky to warrant more than a fraction of their original value. Beim says the government has pumped billions of dollars into banks in recent months. With their cash cushions comfortably plumped, the banks don’t need to sell those securities as badly as they did before. He says that’s got plenty of people wondering if there’s any need for the P-PIP at all.

I’m Ashley Milne-Tyte for Marketplace.

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