Wednesday, January 28, 2009

FDIC May Run U.S. "Bad Bank"

The Federal Deposit Insurance Corp (FDIC) is aiming to take control of a widely mooted "bad bank," to be set up by the U.S. government to mop up toxic assets of struggling banks, Bloomberg News reported on Tuesday.

Numerous U.S. lawmakers expect the Obama administration to produce a new strategy soon for stabilizing the nation's troubled banks, and believe several options are under discussion.

CNBC reported that the Obama administration is set to announce the outlines of its financial rescue plan early next week.

FDIC Chairman Sheila Bair would run the operation, Bloomberg said, citing a source familiar with the matter. It said another source told the news agency that Bair is arguing that her agency could help finance the effort by issuing bonds guaranteed by the FDIC.

U.S. Senate Banking Committee Chairman Chris Dodd said on Tuesday he was aware the Obama administration was discussing the idea of establishing a "bad bank" to mop up toxic assets, and added the idea made some sense.

"I'm aware they're discussing it," Dodd, a Connecticut Democrat, told reporters outside the Senate. "I think that idea has arrived. It makes some sense to me."

Dodd's committee would presumably be consulted if the administration were going to try and establish an aggregator bank, or "bad bank," to take troubled assets off banks' balance sheets, although Dodd said administration officials had not talked personally to him about it.

"There's talk about it but not to me specifically."

Source: Reuters

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