Friday, August 27, 2010

PPIP Benefits Usual Suspects

The federal government put up three quarters of PPIP's capital, in addition to providing below market interest loans. Two private investors, BlackRock and Wilbur Ross, warrant comment.

Wilbur Ross' Sago Mine exploded, killing 12 workers. The same Ross invested in BankUnited, which received a $4.9 billion subsidy from the FDIC. BankUnited is going public a mere 15 months after its purchase by a consortium of private equity underwriters (PEU's). Ross owns two other banks, one with an $800 million FDIC subsidy.

BlackRock defaulted on Peter Cooper Village/Stuyvesant Town, transferring billions in loan guarantees to Fannie Mae and Freddie Mac. Treasury Secretary Tim Geithner smirked while dancing around this fact.

While the government brags on PPIP returns, Uncle Sam enriches people and firms with significant black marks. Projections show the fund could return $6.2 billion on the $22 billion investment over the next nine years. That's a 3.1% return for taxpayers. PEU's expect 30% annual returns, frequently on the government's dime or in safe waters carved out by federal law. Note the imbalance.