FDIC moves toward new market

In an attempt to rid itself of assets from failed banks, the Federal Deposit Insurance Corp. (FDIC) is looking to tap into the securitization market with three new guaranteed deals totaling $4 billion.

The first of these deals is expected to be sold this week, according to documents obtained by Dow Jones Newswires, and is reportedly for a $1.8 billion offering. The documents say that the offerings pool assets held by failed banks that the agency has had to seize to protect depositors.

In fact, the FDIC, which is responsible for taking over all institutions that have failed as a result of the economic crisis, has had to take over a total of 165 financial institutions over the last two years.

In these new deals the buyer will pay 20 percent of the assets' value and try to work out the loans by reducing the interest rate, extending the maturity, writing off some principal or getting buyers to put up equity. Once the loans start to perform, the FDIC, which retains 80 percent ownership, shares in the returns. The arrangement, it is hoped, will allow the regulator to reduce its own risk.

Assets from the Franklin and Corus banks - which were took over by the FDIC in November 2008 and September 2009 respectively - include residential, commercial and construction loans and have been pooled - in addition to other failed bank assets - into the three notes totaling $4 billion, according to the leaked documents.

The deals, which are reportedly offered via the private-placement market, are led by Barclays Capital. The Barclays PLC unit declined to comment, as did the FDIC who declined to either confirm or deny that it was marketing a deal at all.

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