FDIC sells toxic assets in public-private partnership

Discussion in 'Wall St. News' started by ASusilovic, Feb 27, 2009.

  1. WASHINGTON(MarketWatch) - In what could be a model for taking care of banks' toxic assets, the Federal Deposit Insurance Corp. has sold $1.5 billion of residential and commercial construction loans in distressed markets to a combined public-private fund, where the agency still maintains a majority stake in the assets, the FDIC said Thursday.
    The public private auction process reflects the kind of deals that were struck as part of the Resolution Trust Corp., or RTC, which was a government-owned investment fund that bought bad assets after the savings and loan crisis at the end of the 1980s and early 1990s, FDIC Deputy Director James Wigand said in a statement.
    "The FDIC is drawing on its previous successes and those of the Resolution Trust Corp.," said Wigand. "During the last banking crisis, when asset values were similarly difficult to ascertain, these types of structures ultimately resulted in superior recoveries relative to the then-depressed market valuations."
    The International Monetary Fund has estimated global losses of $2.2 trillion on U.S.-based assets, including residential mortgages, commercial real estate loans, credit cards and other loans.
    As part of a deal to sell assets of the failed First National Bank of Nevada, the FDIC took the loans and placed them into a trust that it retains an 80% interest in. As part of the deal, once certain performance thresholds are met, the FDIC's interest drops to 60%.
    The quasi-sale was made as part of an auction. The winning bidders were Diversified Business Strategies and Stearns Bank NA, which has locations in Minnesota, Arizona and Utah.
    The FDIC reports that there were 18 bidders that submitted 30 unique bids for the two groups of assets.


    So, there is some interest out there for "toxic assets"..
  2. I'd buy them for myself if they were in small enough denominations, and the govt backstopped them like they are for banks & big investors. That's like free money!

    however, I think normal individuals wont get to get a piece of this. (Well, only the tax bill for the backstop).