The Securities Industry and Financial Markets Association (SIFMA) filed responses to questions posed by the Federal Deposit Insurance Corporation (FDIC) regarding the Legacy Loans Program under the Public-Private Investment Program (PPIP), as part of the industrys commitment to play a constructive role in crafting a solution to the current financial turmoil.
Clearing toxic assets off of banks’ balance sheets is an essential first step to jumpstarting our credit markets and turning the corner on this recession, but it must be done in a way that is fair and transparent and maximizes taxpayer upside, says Tim Ryan, president and CEO, SIFMA.
The FDIC has posed a number of vital questions on how best to achieve this end. This proposal is an important complement to the Legacy Securities Program, which together will be crucial to unclogging our financial system, as it reaches not just our largest institutions, but regional and small firms as well.
Certain elements of the program will require flexibility so that they can evolve as the government gains experience in the auction and investment process and in case the imperatives of the economic recovery shift. Over the course of the program the scope of eligible assets, auction processes and the pre-clearance of investors and asset managers may fall into this category.
On the other hand, other elements of the program need to be firm at the outset and remain so throughout in order to reduce fears of retroactive changes that would chill participation and reduce the programs effectiveness. Elements which must remain consistent include the governance, terms of warrants, fees charged by the FDIC, nature of oversight, any restrictions on investors and sellers and investor disclosure.
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