In a review published by the American Bar Association Business Law Committee in November 2009, Tom Vartanian and Gordon Miller discuss the continuing efforts of the Federal Deposit Insurance Corporation (FDIC) to innovate in its receivership operations.
As the article details, the significant increase in the number of watch list institutions and their total asset size and the decline in the size of the Deposit Insurance Fund (DIF) and the ability of the banking industry to absorb losses have put continuing pressure on the DIF. In the face of these conditions, the traditional methods of the FDIC to resolve failed institutions have evolved. The authors discuss the four principal resolution strategies the FDIC is now pursuing: loss sharing transactions with strategic buyers; loss sharing transactions with joint ventures between strategic buyers and private equity investors (PE Investors); transactions with PE Investors that acquire a shelf charter and can tolerate the restrictions established by the FDIC's new policy statement on qualifications for failed bank acquisitions; and most recently, split or "good bank/bad bank" transactions.
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