Jim,

I understand the logic in today’s article of how much overvalued a bank’s assets may be.

Though, I do get lost in the article when the writer says that the FDIC entered in an additional and other loss share arrangements for 1.5 billion.

Where did those assets come from? It doesn’t seem that they were part of the stated assets of the failed banks.

I would appreciate you helping me gain better insight into this issue.

CIGA Don

Don,

The assets being guaranteed as to value by the FDIC is their worth-less or worth-little OTC derivatives held by the institution that the new owners have acquired. They are guaranteed at the stated value at the time of transfer. The assets are exactly what is overvalued by today review. It is no longer required that the new owners even be banks or financial institutions. Acme Plumbing Inc. can take over a bank if they want. No money of substance is required. However, to avoid being too obvious many new owners are adopting LLCs that sound like a bank or financial entity. The buyers ( if you can call them that) of the busted banks have been in the main the good ole boy network out of the Wall Street gang. Some are former Bear Stearns Directors.

They are getting a bank with cash and assets (OTC derivatives held by the failed bank) guaranteed as to the stated value at the time of transfer.

I know some of these guys personally.

There is zero risk in taking over a bank under these circumstances.

If the buyer accepts some of the risk as a percentage, it usually does not exceed the bank’s cash at time of transfer.

By zero risk, I mean none whatsoever.

If you are not a member of one of the good ole boy financial fraternities don’t even think about it.

Regards,
Jim