Comments on: Guaranty is bankrupt: BBVA gets its FDIC-seized assets http://www.creditwritedowns.com/2009/08/guaranty-is-bankrupt-bbva-gets-its-fdic-seized-assets.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Edward Harrison http://www.creditwritedowns.com/2009/08/guaranty-is-bankrupt-bbva-gets-its-fdic-seized-assets.html#comment-56902 Edward Harrison Sun, 23 Aug 2009 12:04:00 +0000 http://www.creditwritedowns.com/2009/08/guaranty-is-bankrupt-bbva-gets-its-fdic-seized-assets.html#comment-56902 It is a good deal, definitely. The FDIC is undercapitalized. Back in July, after IndyMac, the first relatively large bank went to the wall, I wrote a post which pointed to this: http://www.creditwritedowns.com/2008/07/does-fdic-have-enough-money.html The FDIC couldn't even handle the bankruptcy of a large regional bank. So, now, with the avalanche of bankruptcies actually happening, they need to dispose of these assets as quickly and efficiently as their under-capitalized position allows them to do. Sheila Bair has already asked for hundreds of billions of additional money. But, for the time being, one solution is gifting the seized banks to other institutions or financial buyers on favorable terms in order to prevent an immediate depletion of FDIC capital. In the end, this is another secret transfer of capital from taxpayers to the banks, of course. And the eventual cost of the crisis will be that much higher as a result. It is a good deal, definitely.

The FDIC is undercapitalized. Back in July, after IndyMac, the first relatively large bank went to the wall, I wrote a post which pointed to this:

http://www.creditwritedowns.com/2008/07/does-fdic-have-enough-money.html

The FDIC couldn’t even handle the bankruptcy of a large regional bank. So, now, with the avalanche of bankruptcies actually happening, they need to dispose of these assets as quickly and efficiently as their under-capitalized position allows them to do.

Sheila Bair has already asked for hundreds of billions of additional money. But, for the time being, one solution is gifting the seized banks to other institutions or financial buyers on favorable terms in order to prevent an immediate depletion of FDIC capital.

In the end, this is another secret transfer of capital from taxpayers to the banks, of course. And the eventual cost of the crisis will be that much higher as a result.

]]> By: Anonymous http://www.creditwritedowns.com/2009/08/guaranty-is-bankrupt-bbva-gets-its-fdic-seized-assets.html#comment-56901 Anonymous Sun, 23 Aug 2009 11:40:00 +0000 http://www.creditwritedowns.com/2009/08/guaranty-is-bankrupt-bbva-gets-its-fdic-seized-assets.html#comment-56901 According to BBVA, the loss sharing agreement says that the FDIC would face 80% of the first 2300 million in losses from acquired credits, and 95% of the rest. ¿Is that normal? It looks like an awfully good deal to me (not being a US taxpayer, of course). No word on the price paid, if any, as of yet. Somehow, one would think this little detail merits a mention in the press announcements. According to BBVA, the loss sharing agreement says that the FDIC would face 80% of the first 2300 million in losses from acquired credits, and 95% of the rest.
¿Is that normal? It looks like an awfully good deal to me (not being a US taxpayer, of course).
No word on the price paid, if any, as of yet. Somehow, one would think this little detail merits a mention in the press announcements.

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