CAP’s Michael Ettlinger, Andrew Jakobovics, and David Min have developed a set of recommendations to make the implementation of the Public-Private Investment Plan go as well as possible. This is key. As I said yesterday, a lot of the competing opinions about the merits of the Geithner Plan basically amount to competing assumptions about how it’s likely to be implemented based on different impressions of the trustworthiness of the administration. But speculation is ultimately not that useful. What’s needed is advocacy for good ideas that will help push in the direction of good implementation.
The key recommendations are:
If Treasury addresses a number of key issues still to be resolved, we believe that PPIP has a better chance of delivering on its promise to protect taxpayers, resolve the toxic assets problem, rebuild credit markets, and help the economy recover from the recession which began in December 2007. As implementation of PPIP proceeds, we believe it is important that the administration:
* Ensures moving mortgages off the books of lending institutions doesn’t adversely affect the opportunities for mortgage modification—both to allow responsible homeowners facing mortgage-payment problems to avoid unnecessary foreclosures and to ensure that holders of mortgages choose modification over foreclosure where that will maximize the value of the mortgages they hold.
* Limits the holders of large quantities of toxic assets from participating in the PPIP investment vehicles that will purchase these assets.
* Applies appropriate standards for private fund managers chosen to purchase toxic assets from financial institutions.
* Makes transaction information readily available to ensure an efficient, fast-moving market.
* Sets up performance metrics to determine if the program is working as conceived.
* Provides the general public with information as the program proceeds.
* Includes the broad public in the benefits from any windfall profits.
* Ensures the amount of debt financing provided by taxpayers is not too high as Treasury fleshes out the amount of leverage it will provide as part of PPIP.
As for a prediction, I guess I’m cautiously optimistic that this will be done right. But either way, it’s worth pushing for good ideas since we can be sure that the interested parties will be making their views heard.
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