PPIP and TARP TransparencyHarold P. ReichwaldSecretary Geithner has announced that he expects the PPIP program for the purchase of so-called Legacy Loans from banks to be up and running before June 30, 2009. This should be a signal to the investing community that the start-up phase will not be bogged down for a lengthy period of time in a bureaucratic process.This is the good news However, there also is some potentially bad news to consider. Only hours before the Secretary’s comments, the House and Senate completed work on the Helping Families Save Their Homes Act of 2009, which was promptly signed into law by the President. This hopefully salutary piece of legislation has embedded within it some troublesome provisions that should be of interest to every potential investor seeking opportunity through the purchase of Legacy Loans under the FDIC’s PPIP program.Section 601 of the newly enacted statute amends the original TARP authority legislation passed in October 2008 (the “EESA”). Originally, Section 116 of EESA mandated the U.S. Comptroller General (not the Comptroller of the Currency) and the Government Accountability Office to essentially perform an audit function over any U.S. governmental unit engaged in any activity under the authority of TARP. This was intended to provide the necessary financial oversight to ensure the proper expenditure of U.S. government funds by government agencies. The amended version of Section 116 goes further and should give potential investors some pause as they contemplate making a PPIP investment.The amended Section 116 requires that every agreement between the Treasury or any TARP unit of government with a nongovernmental entity must provide for access by the Comptroller General to the books and records of the nongovernmental entity participating in a program under TARP, thereby extending the reach of the Comptroller General’s authority. Since the Treasury has stated its intention to use TARP funds for its contribution of 50% of the equity of each the public/private entity established to purchase Legacy Loans under PPIP, each of those nongovernmental entities is now subject to audit by the Comptroller General.While that may be reason for some to question the wisdom of participating in PPIP, the new enactment also provides that this audit right may extend to all who may be considered an agent or representative of the contemplated public/private entity, such as a managing member of a limited liability company, a general partner of a limited partnership, an officer and director of a corporation and others in similar positions. It also raises the possibility of an interpretation that includes any other person directly or indirectly participating in the PPIP program.The dragnet quality of the amendment may not have been intended. At the very least, the FDIC and the Treasury need to clarify how they intend to proceed given this new enactment. Otherwise, there is a considerable risk that potential purchasers may decide it is better to simply sit on the sidelines without having an audit spotlight on them.Interesting, Lee
Ok why is this significant?
Well let's look at who other than the American people have been investing in these banks.
Prominent recent investments include participations by GIC (Singapore) and ADIA (UAE) in Citigroup; byTemasek (Singapore), KIC (Korea), and KIA (Kuwait) in Merrill Lynch; by CIC (China) in Morgan Stanley; andby GIC (Singapore) in UBS.
The new enactment also provides that this audit right may extend to all who may be considered an agent or representative of the contemplated public/private entity, such as a managing member of a limited liability company, a general partner of a limited partnership, an officer and director of a corporation and others in similar positions. It also raises the possibility of an interpretation that includes any other person directly or indirectly participating in the PPIP program.
The amended Section 116 requires that every agreement between the Treasury or any TARP unit of government with a nongovernmental entity must provide for access by the Comptroller General to the books and records of the nongovernmental entity participating in a program under TARP, thereby extending the reach of the Comptroller General’s authority!
Public Private investment Platform or PPIP is hardly public at all, all of these SWF's and other gov entities will not have to worry about this audit right however private groups or funds that may be considering participation will be. Seems like a stacked deck to me!
So not only do we the American people get to carry all the risk of loss while these foriegn funds can only win but, it is being designed to discourage us or our funds from getting involved.
Am I really the only onr that sees a problem with this?
Serious, Lee
tl;dr
nobody else will either.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
What's so surprising about this? It's the State what else do you expect. Been goin' on for decades now, this is nothing new... old news.
Well thanks for the repies.
At least I know I'm not just nuts but, it's amazing that these things are just taken with a grain of salt.
These are Americans homes being sold with our tax money backing them by banks that we bailed out.
Making the deals look attractive and we are litterally being told not to participate.
Maybe i just was not paying that close of attention in the past but, I find this very frusterating!
Best, Lee
Lee:These are Americans homes being sold with our tax money backing them by banks that we bailed out.
Americans are net consumers, not producers (Consumption 70% of GDP). Americans don't pay enough taxes to offset the foreign debt (foreign savings) they consume.
Lee:Maybe i just was not paying that close of attention in the past but, I find this very frusterating!
Waking up is hard to do. Assume everything you have been told is a lie. Start from scratch, from simplest premises. Check them one by one. You'll be amazed what a curious mind can discover.
Liberty,
liberty student:Americans are net consumers, not producers (Consumption 70% of GDP). Americans don't pay enough taxes to offset the foreign debt (foreign savings) they consume.
True as that may be the people are being fleeced and the money that is here waiting on the sidelines will be invested elsewhere.
The chain of events that are taking place is going to further the gap between the haves and the have nots.
We are not headed towards a happy place.
Ingorance was far more blissful! Knowledge has yet to grant me the power to make a difference! LOL freaken lies!
Have a great weekend Cheers