The Federal Deposit Insurance Corporation (“FDIC”) has requested public comments on all aspects of its proposal, announced on March 23, 2009, to remove troubled “legacy loans” and other assets from banks’ and thrifts’ balance sheets by creating Public-Private Investment Funds (“PPIFs”) to purchase them. See Enlisting Private Equity to Rescue “Legacy Assets”: Treasury Announces Public-Private Investment Funds Structures, 21st Century Money, Banking & Commerce Alert® (Mar. 25, 2009). The FDIC has announced its intention to launch this program as quickly as possible. The deadline for providing public comments is Friday, April 10, 2009.
The FDIC request includes 17 multiple-part questions. The request for comments and the preliminary program descriptions that have been released indicate the great breadth and depth of the open issues that must be resolved before the first PPIF is organized and the first legacy loans are purchased.
Among the issues highlighted in the request for comments is the fundamental question for private investors of what the relative role of the government and private investors will be in the selection and oversight of asset managers. In this regard, although not addressed in any of the materials released to date, the FDIC has indicated that Legacy Loan PPIFs would be subject to the federal government’s loan modification program.
The FDIC appears to be very receptive to receiving private sector input to make the Legacy Loans Program as effective as possible. The full text of the request for comments may be found on the FDIC website at http://www.fdic.gov/llp/progdesc.html.