FDIC Seeks to Avoid Getting Fleeced on Soured Loans

Monday, 26 Apr 2010 08:45 AM

By Dan Weil

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The government, which many say was ripped off blind when it sold thrift assets in the early 1990s, is being a bit more careful this time around.

The complaint last time was that the government sold the savings and loans’ assets cheap, and then the buyers reaped all the rewards.

But this time the Federal Deposit Insurance Corp. (FDIC) has maintained stakes of 50 percent or more in at least five loan portfolios that it sold since September, Bloomberg reports.

And the agency that takes over failed banks is requiring that it receive up to 70 percent of the gains when the toxic assets are re-sold.

“They are doing a much better job this time around,” John Bovenzi, former FDIC chief operating officer, told Bloomberg.

“They have learned a lot, and they aren’t making the same mistakes.”

The roster of those buying failed bank assets now reads like a who’s who of the investment community: Starwood Capital Group, Colony Capital and TPG, for example.

The leaders of those firms cleaned up during the 1990s savings and loan crisis. And now they’re buying assets for little as 22 cents cash on the dollar, according to Bloomberg.

All sorts of investors want distressed assets now.

"Large public REITs raised about $25 billion in cash to buy commercial real estate and other real estate assets as banks failed," Mike O'Rourke, chief market strategist at brokerage firm BTIG, told CNBC.

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