U.S. Treasury launches first toxic asset funds

By Karey Wutkowski and Jennifer Ablan

WASHINGTON/NEW YORK (Reuters) - The U.S. Treasury recede t off to a modest start with its plot to aid cleanse banks of toxic assets when it announced on Wednesday that two funds to buy mortgage securities had raised $1.13 billion (708 million pounds) in private capital.

Invesco Ltd and Trust Company of the West, or TCW, are the first of the so-called Public-Private Investment Funds to raise the necessary capital to launch the program.

The Treasury said on Wednesday it expects seven more funds will complete initial closings by the finish of October.

The Public-Private Investment Program, or PPIP, has been dramatically scaled back as banks have proven that they can raise capital in the private label ets without first unloading distress d assets, many of which are tied to evil mortgages.

When the plot was announced in March, the recede vernment hoped the funds could hold up to $1 trillion of toxic assets off bank balance sheets but that taracquire is now $40 billion, comprising private and public investments plus debt financing.

"I am pleased with the progress we have made in launching PPIP," Treasury Secretary Timothy Geithner said in a statement. "This program allows Treasury to portion ner with leading investment management firms to increase the flow of private capital into the label et for legacy securities and give taxpayers a chance to share in the profits."

The Treasury said the two funds' $1.13 billion of private-sector capital commitments will be matched by the recede vernment.

Jeffrey Gundlach, chief investment officer at TCW, declined to comment while calls to Invesco were not returned.  Continued...