Thursday, April 2, 2009

FDIC to Sponsor More Bank Corporafornication?

Tim Geithner's public-private partnerships enable banks to sell distressed assets at better prices, restarting the market for such assets. He devised a sweet deal for private investors, who could put up as little as 3% of PPP capital. Now banks want a bigger piece of the expected 25% returns on truckloads of toxic assets. Bloomberg reported:

The FDIC may allow the sellers of a loan to get an equity interest in the vehicle that buys it, meaning they would gain from any future increase in the asset’s value. The aim is to give healthier banks an incentive to sell loans at a cheaper price, encouraging more investors to make bids.

The new system may be as complex as the securitization process that packaged junk for years. Corporafornication remains alive and well.