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The Need for Transparency & FDIC Bidding on CRE Assets
October 13, 2009 by Neil · Leave a Comment
Where transparency and accountability are in short supply, the likelihood of corruption increases. The obvious solution, especially in the higher reaches of government, is to err on the side of more transparency and accountability. As the FDIC gears up to sell additional portfolios of toxic assets, it is going in the opposite direction, away from transparency. The FDIC stopped revealing the names of losing bidders and the details of their bids since late May. The FDIC refused to say whether this cloak of secrecy will remain in place, or disappear anytime soon.
Some theorize that the FDIC is concerned for the reputations of the highest bidders, who might be paying above and beyond the offer of the next highest bidder. Those who think the FDIC is not especially concerned with embarrassing banks and funds suspect something else: private-equity groups might want to pursue failures without attracting public attention. By extension, the FDIC might not want the attention either.
If the FDIC is selling large portfolios for pennies on the dollar, taxpayers would be better served if the FDIC hired significantly more staff (perhaps suitable candidates can be culled from America’s 18% unemployed and underemployed) to facilitate the sale of toxic assets in smaller, discrete packages. This would also mark these toxic assets to market more quickly, setting benchmarks for asset classes across the board. As a result, more banks could loan more money, since they have comparable prices they desperately need to underwrite loans.
