At the height of the Great Depression, the FDIC (Federal Deposit Insurance Corporation) was formed by the The Banking Act of 1933. During The Depression, approximately 9,000 banks failed and the FDIC stepped in and sold the banks’ assets. Early on, performing loans from these banks were sold to the private sector and the FDIC would handle the “work-outs” in which the FDIC negotiated the settlement of the debt.

In the mid-1980’s, the FDIC had to create a loan sale program that could market these loans and package them into pools. Due to the sheer volume of loan sales in the late ’80s/ early 90’s, the Resolution Trust Corporation (“RTC”) implemented a bulk sales program to dispose of the assets from troubled banks and Savings and Loans. Even then, the FDIC and RTC were forced to look outside themselves to third parties to process the loan sales. These third parties assist in pre-receivership balance sheet clean-ups, as well as post-receivership asset sales. These third parties are generally referred to as Loan Sale Advisors, and include First Financial Network, DebtX, and Mission Capital.

Nowadays the FDIC still holds loan sale auctions brokered through loan sale advisors and also used other programs such as their Legacy Loan program and LLC Structured sales. If you haven’t ever visited the FDIC website, you should take a peek of their “Asset Sales” webpage to learn more about how one qualifies for loan sale programs.

There were 140 bank seizures in the year 2009, the highest level of closures since the Savings and Loan crisis. If you think last year was record breaking, 2010 could possibly meet if not exceed those levels. The FDIC is poised to dismantle and sell off more failed banks, having increased their staff to over 2,000 agents that are charged with resolving distressed banks. In the midst of our economic recovery, this may come as a surprise to some, but the banking industry is bracing itself for the aftershock of the economic earthquake of 2008. The meltdown of the housing market may be reaching bottom, but the trouble in the commercial sector has just begun.

The results of all this is that performing, first position notes are being sold by the FDIC for as little as 40 cents on the dollar. If this is something that interests you, we would be happy to discuss it with you personally.