Today, the FDIC opened the comment period for its recently announced Legacy Loans Program. Comments are due by April 10, 2009. Chairman Sheila Bair has acknowledged that several terms of the Program are not necessarily final, and the FDIC is eagerly soliciting public comment to assist in finalizing the Program to best suit both the taxpayer and the private investor. Several of the Program terms on which the FIDC is seeking comment include:
- The 50/50 equity split between Treasury and private capital, and whether private investors should be allowed to participate at a higher percentage;
- Determination of the optimal size of the asset pools up for auction and the frequency of such auctions;
- Whether a participating bank would receive cash or a note for the sale of such assets into the Program;
- The potential conflicts among Program participants; and
- Whether the Program will be expanded beyond "legacy" real estate assets to consumer or other loan types.
In our recent Advisory describing the Legacy Loans Program, we have raised several policy additonal issues, such as how the FDIC will balance the interests between the participating banks and private investors, as well as the FDIC’s overall role in facilitating the Program.