Deposit Insurance

F.D.I.C. Sells Failed Bank’s Troubled Mortgages to Private Investor

(THE NEW YORK TIMES) - Offering the lure of cheap government-guaranteed financing, the Federal Deposit Insurance Corporation moved on Wednesday to push its efforts to have private investors buy distressed mortgages from troubled banks.

Agency officials announced that they had reached a deal to sell $1.3 billion in mortgages from Franklin Bank, a Houston-based lender that failed last November and was taken over by the F.D.I.C.

It was the first deal reached under an Obama administration program announced this spring to help banks sell their problem loans, clean up their balance sheets and get credit flowing again.

But even though the F.D.I.C. is providing generous subsidies that could cost taxpayers heavily in the future, banks have generally refused to sell their troubled mortgages at the steeply discounted prices that bargain-hunting investors have demanded.

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