WASHINGTON – The FDIC said yesterday it is scrapping a program that would have auctioned off mortgage-backed and other troubled mortgage loans held by banks and plans instead to sell hard-to-price assets seized from failed lenders using guaranteed debt financing.
A test auction of illiquid bank assets, planned this month, was delayed this week after banks raised capital without needing to sell bad loans, the agency said. The FDIC will instead use debt guarantees as an incentive for buyers of assets when lenders are in receivership, the agency said.
Since the program was announced, U.S. banks have raised capital through stock sales and by converting preferred shares.
Selling assets from failed banks will be modeled on a process used by the Resolution Trust Corp. to shut failed savings and loans in the 1980s and 1990s. Bids will be solicited in July, the FDIC said.
