FDIC to "Soften" Rules for Buyers of Bad Banks

If you find yourself wondering why the FDIC would be changing its tune and bending the rules to allow private equity to gobble up failed banks, you may want to start by asking yourself how much cash the FDIC has remaining in its coffers. Here's a hint: ZERO


In an attempt to attract more buyers for failed banks, the Federal Deposit Insurance Corp. is expected next week to soften its proposed restrictions on private-equity firms buying collapsed lenders, according to people familiar with the matter.

While FDIC officials are still hammering out details of the final rule, the agency is expected to back away from aspects of its July proposal, including a requirement that buyout firms that bid on failed institutions maintain much-thicker capital cushions than banks, these people said.

The tin foil hattists are saying the FDIC has become a victim to the private equity vultures but I say the FDIC isn't caving because of pressure, it's caving because that's the only way it's going to be able to pawn off these broken banks without having to foot the bill.

But that's just my $0.02, what do I know? Maybe Sheila is sitting on a cache of gold coins that we don't know about.

Said AmericaBlog

We will know more next week but the heavy lobbying efforts by this wealthy special interest are likely to get results at the next FDIC meeting. Following the financial collapse and required bailout, is it critical that the government bends (again) to the wishes of this industry? Asking this industry to be properly capitalized hardly sounds like it should be a problem. Let them gamble their own money instead of always having the government helping hand there to bail out their gambles. Reuters:

The U.S. Federal Deposit Insurance Corp will meet next week to vote on a proposed policy that would force private equity groups to maintain high capital levels and put a large amount of their own money at stake when investing in failed banks.

The FDIC provoked a backlash when it proposed the guidelines in July and is expected to soften the policy when it meets Aug. 26. The meeting's agenda was posted to the FDIC website Wednesday, but provided few details on the specific proposals.

Some investors and regulators said earlier that the proposed rules were too harsh and would quash the interest of private equity groups at a time when the FDIC is trying to court investors for an increasing number of failed banks.

And the value of private equity groups is what? There's certainly a need for it but it's hardly a pivotal sector that requires special privileges.
It's not lobbying, it's called not having any money. I'm shocked the ruse has lasted this long.

And we will still bring you all the worst from the bank failure frontlines at Bank Fail Friday because let's face it, things will get a lot worse before they can get any better.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Anonymous said...

Well that destroys my pet tin foil hat theory that the larger (pseudo) Ibanks were going to swallow some smaller banks to stay 'solvent'. But if you are (more than likely) correct, JR, then there isn't that convenient toxic garbage disposal to let the taxpayer acquire the worthless junk while the Ibank keeps the assets.

The giveaways never cease, do they?

And private equity >coughSearscough< has such a good track record at turning businesses around....


Let the record reflect that I've never been one of those "I told you so" kind of girls. But especially in cases like *this* (as in the entire mess, not exclusive to the FDIC's mess), I would much rather be wrong.

I just found it funny that the FDIC's insolvency didn't strike anyone as peculiar in the private equity decision. Yeah, sure, ok, "lobbyists" did it.

We don't even know which end is up any longer. Guaranty is now property of a Spanish bank and we're PPIPing OUR assets to Chinese investors?

What the fuck is going on here?!

Private equity won't be able to save the FDIC. So hopefully they are preparing for *that* reality. :P

Oh and as for your little theory, I think the TBTF and almost TBTF burned through the good banks already otherwise they'd still be doing just that.

What is "solvent" anymore?