Sheila Bair, chairman of the Federal Deposit Insurance Corp, is in New York on Friday to meet with hedge funds, private equity funds and pension groups to promote the government's plan to cleanse banks' balance sheets of toxic assets, a source familiar with the meeting said on Friday.

Bair has said she would like all types of investors to participate in the Public-Private Investment Partnership (PPIP), including private equity groups and individual investors.

The U.S. Treasury Department announced more details last month on the PPIP, which will use government funds and private capital to buy up to $1 trillion in distressed loans and securities.

The plan hinges on the interest of private capital. Private investors will bid on banks' distressed, or legacy, assets in auctions, and the government will provide the investors with low-cost financing to buy the assets.

The government also plans to match private capital's investment with government capital, sharing in the expenses and the gains of the pools of distressed assets.

The FDIC is handling the auctions to sell the banks' whole loans, while the Treasury and Federal Reserve will run programs to handle banks' mortgage-related securities.

Officials are hoping to launch the programs by the end of May.

(Reporting by Karey Wutkowski, editing by Gerald E. McCormick)