To the Editor:

The article from Sept. 25 on the Federal Deposit Insurance Corp.'s agreement with First Financial Bank to take over the Irwin banks ["Acquirer Impresses with Terms Won in Failure Buy"] fails to capture how the process works. The FDIC resolves failing banks through a competitive auction process. FDIC establishes the structure and terms of the transaction and offers the same provisions to all bidders, ensuring a level playing field.

This process allows the FDIC to compare bids quickly to determine which is the least costly. By law, the FDIC must accept the least-cost bid, a fact the article neglected to mention. Without the bid from First Financial, that cost would have been even higher.

The FDIC has continued to modify the structure and terms of its offerings based on feedback from bidders, the characteristics of the failing banks and overall market conditions. The structure and terms of the Irwin banks offering have been offered in other recent resolutions and are not unique. Bids that do not conform to the FDIC's proposed transaction are evaluated if the nonconforming terms can be priced. Frequently, the nonconforming terms impose higher costs and are rejected because they are not cost-competitive relative to conforming bids.

Jim Wigand
Deputy director
Division of resolutions and receiverships

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