In what appears to be an effort to limit the brewing criticism that his plan to rid banks of their toxic assets will benefit only the rich and powerful, Treasury Secretary Tim Geithner yesterday tailored his Public Private Investment Program to include the little guys.
The program, dubbed PPIP, aims to remove toxic assets from the system by giving private investors, such as hedge funds and mutual funds, leverage to buy toxic loans and securities through two programs.
But PPIP’s legacy-securities program, the part that seeks to buy up toxic securities, has been the subject of criticism for its structure, which aims to make five large asset managers gatekeepers of the funds.
Under the original plan, the five managers with $10 billion in distressed assets under management were to be chosen to manage the assets on behalf of other investors and the government, raising concerns that the game was rigged.
Under the old criteria, “there were only a very small handful of people” who would have made it, said Chip MacDonald, a Jones Day attorney. “It wasn’t entirely clear that even some of the large mutual funds would qualify.”
Yesterday, Treasury moved to widen the applicant pool by lowering the bar and declaring that participants won’t be required to meet every qualification.
“Failure to meet any one criterion will not necessarily disqualify a proposal,” the Treasury said.
The Treasury also extended the application deadline from Friday to April 24, and it suggested it could increase the number of managers once the selection process ended.
It also encouraged “small, veteran, minority- and women-owned businesses” to get in the game by partnering with private-asset managers as “an asset manager, an equity partner, or a fund-raising partner.”
Last week, The Post reported that the $71 billion asset manager Bridgewater said it was passing on participating in PPIP because of the issues the Treasury addressed yesterday.
