Tuesday, October 27, 2009

A New (Toxic) Asset Class to Be Created By FDIC?

FT Alphaville cites this from Structured Finance News (10/27/2009):

"The Federal Deposit Insurance Corp. (FDIC) has seen a growing volume of assets acquired from failed banks in its role as receiver of these institutions.

"Michael Krimminger, special advisor for policy, office of chairman at the FDIC, spoke at Information Management Network’s 15th annual ABS East conference in Miami.

"As part of his speech, Krimminger said that the FDIC has acquired more than 100 failed banks and it is likely that the agency might consider securitizing the assets from these financial institutions."

The conference was from October 25 to 27, and Mr. Krimminger was a panelist on an October 26 event.

A security created out of assets held by failed banks that FDIC couldn't sell. If someone can somehow manage to slap on even an "A" rating, it should sell like hot cakes among savvy investors (pension funds, university endowments, money market funds...). That should boost the confidence and morale in the financial markets, no doubt.

After all, with the reputation of the rating agencies (Moody's, Standard & Poor, Fitch) in tatters, it may not matter much anyway whether the security is rated AAA or BBB.


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