The Federal Deposit Insurance Corp. confirmed Wednesday that it has postponed a planned pilot test of its Legacy Loans Program but said it will still test-drive parts of the program this summer.
As first envisioned, the plan would match $1 of both private and government equity with as much as $6 in FDIC-guaranteed debt to let investment funds buy a bank's troubled loans. The FDIC said "renewed investor confidence in our banking system" made auctions for an open bank's assets unnecessary.
But the FDIC is still planning to test the program through a sale of assets seized from failed banks.
"This funding mechanism draws upon concepts successfully employed by the Resolution Trust Corp. in the 1990s, which routinely assisted in the financing of asset sales through responsible use of leverage," the agency said. "The FDIC expects to solicit bids for this sale of receivership assets in July."
Buyers will still have access to FDIC-guaranteed debt — but not government equity — to test the program's funding mechanism, the agency said.
