This week, the U.S. Treasury announced the much-anticipated details of the Public Private Investment Program (”PPIP”) that was introduced in summary form by Treasury Secretary Timothy Geithner last month.1 The program, which is part of the Obama Administration’s broader “Financial Stability Plan,” focuses on the purchase of what were described as “troubled assets” under the Troubled Assets Relief Program (”TARP”), part of the Emergency Economic Stabilization Act of 2008 (”EESA”) enacted last October. Although the TARP was originally proposed as a purchase program for troubled loans and mortgage-backed securities, the Bush Administration applied the first portion of the TARP proceeds toward direct capital infusions into banking institutions. The objectives of the PPIP are much closer to the original objectives of the TARP: to thaw the nation’s credit markets by moving legacy assets off the balance sheets of financial institutions so those financial institutions can expand their lending activities. For more information click here.

In Goodwin Procter’s November 2008 Real Estate Capital Markets Advisor, we presented thoughts on the then current economic environment relating to the commercial real estate industry, focusing principally on mortgage debt. In particular, we summarized the state of the CMBS market, outlining (i) the volume of scheduled maturities over the near term; (ii) the relatively modest delinquency rate on CMBS loans at that time; and (iii) the U.S. Treasury’s then stated intention to use the Emergency Economic Stabilization Act of 2008 to provide capital infusions into the financial system and not to purchase troubled debt. We also provided input on recent changes in the REMIC provisions relating to RMBS pools, and how similar changes could benefit the CMBS market. [Read more →]

In Goodwin Procter’s November 2008 Real Estate Capital Markets Advisor, we presented thoughts on the then current economic environment relating to the commercial real estate industry, focusing principally on mortgage debt. In particular, we summarized the state of the CMBS market, outlining (i) the volume of scheduled maturities over the near term; (ii) the relatively modest delinquency rate on CMBS loans at that time; and (iii) the U.S. Treasury’s then stated intention to use the Emergency Economic Stabilization Act of 2008 to provide capital infusions into the financial system and not to purchase troubled debt. We also provided input on recent changes in the REMIC provisions relating to RMBS pools, and how similar changes could benefit the CMBS market. For more information click here.

Yesterday U.S. Treasury Secretary Timothy Geithner announced a broad, multi-faceted program, the Financial Stability Plan (the “FSP”), designed to strengthen the financial system through additional capital injections to banks, creation of a public/private investment fund to buy troubled assets, establishment of guidelines for mortgage modification, and expansion of a Federal Reserve lending program aimed at small businesses and communities.

Initial market reaction and financial commentary was negative, largely based on uncertainty regarding the details of the FSP and therefore its implications for affected financial institutions, businesses and consumers going forward. In these circumstances, the Administration can be expected to move rapidly to flesh out the details of the FSP. Set forth below are some areas which financial institutions will likely focus on as the details of the FSP are made known. [Read more →]