• Lisa Simpson
• Dec 22,2010
• In: Foreclosure

Taxpayers to Benefit from Public-Private Investment Program

The taxpayers are ready to reap surprising billions from having rescued the banks of the country. Now they can harvest another mega profit from a programme launched by the federal government set up to exit the toxic property assets from the financial scene.

The new programme of the Obama team was named Public-Private Investment Program. The kingpin of the plan is thaw the frozen credit. With no buyers in the horizon for the complicated mortgage securities the health of the banks was at risk causing lending to be impacted.

As per the programme, the government will provide equal funds and extra cheap loans to some investment firms (two names being AllianceBernstein and Oaktree Capital) who would agree to purchase mortgage securities from the financial entities like the banks and others.

The taxpayers have a chance to dip into profits – this being considered to be a second goal of the programme. It has been 9 months since the plan made its debut. The 8th investment funds picked by the Treasury have created a return calculating a return of 15.5% for the taxpayers till last June, according Linus Wilson of University of Louisiana.

Angelo operated investment funds, Gordon-GE Capital consortium and another run by BlackRock have kicked off better beginnings and have posted returns above 20%. It calculates to a paper profit of about $657 million for the taxpayers. Some of the analysts of Wall Street are predicting that the taxpayers could gain nearly $6.2 billion from these investments in the forthcoming 9 years from investment of nearly $22 billion.

The outstanding performances of the funds are largely because of the turn around in the bond market of mortgages that had kicked off in the latter part of 2009. This is unlikely to be repeated. Even then the turnabout is nothing but remarkable.

When this Public-Private Investment Program was announced by the government the critics came down heavily on it. The charge was that it was another bonus being given away to private equity entities and the money managers of Wall Street. Nobel Laureate economist Joseph Stiglitz dubbed it as the “robbery of the American people”.

But the strong start of the funds has silenced all these fears. Davin N. Miller of the Treasury, its chief investment official said “We feel good about the performance to date”. The administration is yet to state its own profit expectations. The proceeds would go towards reducing the budget deficit of the federal government.

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