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Mortgage securitization rides again...
http://online.barrons.com/article/SB...587827838.html
Welcome to the Jungle, baby.
http://online.barrons.com/article/SB...587827838.html
The FDIC must sell assets to continue the closings. It has about $37 billion of bad-bank assets to sell, but the stockpile would bring only 10 to 50 cents on the dollar.
Enter the FDIC's Securitization Pilot Program, the sale of U.S.-guaranteed FDIC senior certificates. This enables the FDIC to push much of the losses off its books, thanks to the U.S. guarantee of principal and interest. The program starts with a $500 million issue.
And who makes up the losses? The notes are backed by loans that are bundled into agency-administered pools. But ultimately, the losses could be absorbed by Uncle Sam.
Some see the FDIC program as a way to avoid going before Congress to seek funds.
"They aren't really selling the bad assets. They're selling the equivalent of a Treasury bond without congressional approval," says William Black, a former thrift regulator. "It hides the economic substance of what's really happening—an unlimited taxpayer bailout."
The FDIC contests the characterization, saying it doesn't expect a claim on the guarantee because of an equity cushion to absorb the losses, and the use of only performing mortgages in the pools. The agency says a lot of resources stand between it and the taxpayer.
Enter the FDIC's Securitization Pilot Program, the sale of U.S.-guaranteed FDIC senior certificates. This enables the FDIC to push much of the losses off its books, thanks to the U.S. guarantee of principal and interest. The program starts with a $500 million issue.
And who makes up the losses? The notes are backed by loans that are bundled into agency-administered pools. But ultimately, the losses could be absorbed by Uncle Sam.
Some see the FDIC program as a way to avoid going before Congress to seek funds.
"They aren't really selling the bad assets. They're selling the equivalent of a Treasury bond without congressional approval," says William Black, a former thrift regulator. "It hides the economic substance of what's really happening—an unlimited taxpayer bailout."
The FDIC contests the characterization, saying it doesn't expect a claim on the guarantee because of an equity cushion to absorb the losses, and the use of only performing mortgages in the pools. The agency says a lot of resources stand between it and the taxpayer.
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