Thanks for the info. Here's the real boilerplate: Loss sharing is a feature that the Federal Deposit Insurance Corporation (FDIC) first introduced into selected purchase and assumption (P&A) transactions in 1991. The original goals of loss sharing were to (1) sell as many assets as possible to the acquiring bank and (2) have the nonperforming assets managed and collected by the acquiring bank in a manner that aligned the interests and incentives of the acquiring bank and the FDIC. Under loss sharing, the FDIC agrees to absorb a significant portion of the lossâtypically 80 percentâon a specified pool of assets while offering even greater loss protection in the event of financial catastrophe, and the acquiring bank is liable for the remaining portion of the loss. Eventually, loss sharing was structured to include a âtransition amountâ so that if losses exceeded the projected amount, the FDIC and the acquirer would share the losses on a 95/5 basis, respectively. The transition amount was defined as the FDICâs estimate of the loss on the loss share assets acquired by the acquirer. The transition amount was used by the FDIC to address the acquirerâs concerns about catastrophic losses resulting from limited due diligence time and uncertain collateral values stemming from deteriorating markets. Source: http://www.fdic.gov/bank/historical/managing/history1-07.pdf
Ian, where are you from? This is America. Yes, you can say these things on TV. To above poster: bank failures are always on Fridays. That is how the Feds handle it: they go in on Friday afternoon and shut the place. That is why the news always comes out on Friday--it is not public until then.
Money here! Get your money here! Lots of free money! Selling free money to replenish the capital reserves of our such well managed banks that we put all of our money into non-performing AAA CDS tranches with a 2% default rate that ended up being off by 100% to 4% thus costing us TARP and many of our retirements. Free Money Here! It'd be funny just to start a bank that owns nothing but 0% loans at 3%.
But that doesn't mean the FDIC, the failed bank and the acquiring bank had no knowledge of the matter until Friday afternoon. So why do FDIC release the news to the public only after the failed bank was acquired? And why does FDIC move in on Friday afternoon for crying out loud? Who the hell really cares if they moved in on Monday or Wednesday?
I haven't seen anything to suggest that AIG was saved for the exclusive benefit of Goldies. For one, I'm pretty sure "exclusive" it wasn't, given SocGen and Deutsche payouts. At any rate, there's a very important lesson here. The system, so far, seems to have been able to deal with smaller bank failures. You could even argue that such failures may be good for the economy in the long run. AIG, Citi and others, on the other hand, were bailed out, rightly or wrongly. The conclusion and the needed course of action seem obvious to me.
You got that backward, dude. They're hoarding 3% T-notes that they bought with free money. Essentially, these banks are getting 3% every friggin' year thanks to Bernanke & Co. at taxpayers' expense. Who's laughing now?
But in the context of what you wrote earlier, AIG should have closed its door and buried six feet under. Are you being a hypocrite or what?
OUCH!!!!! You left out a juicy part.... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $125.3 million. MB Financial Bank, National Association's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to all alternatives. I read that as, "We expect $0.71 on the dollar on the bad crap (aka "non-performing loans") that represented 88% of the bank. We tried every mofo thing we could to get a better deal, but this was the best we could do. You don't like it - Fu(k yourself!" Aren't they the optimists!!!! 71 cents on the dollar!!!! I wonder if they have checked Markit lately http://www.markit.com/en/products/data/indices/structured-finance-indices/abx/abx-prices.page ? Something tells me this will more likely be $0.30 on the dollar and that is being REALLY optimistic! -gastropod
Even MORE JUICY In addition to New Century Bank, MB Financial also assumed all the deposits and purchased all the assets of Broadway Bank: Assets: 1.2 Billion Deposits: 1.1 Billion Loss-share on 878.4 million (87% of assets) Cost to DIF: 394.3 million MB Financial got a two-fer THIS week. In both cases, they didn't even pay the FDIC premium on the deposits. Fat lady is in the building.