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Slicing the toxic pizza, an analysis of FDIC's Legacy Loans Program for receivership assets

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  • Linus Wilson
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    Abstract

    The Legacy Loans Program (LLP) is an elaborate way of slicing the Federal Deposit Insurance Corporation's (FDIC's) receivership assets. At best, the financial structure is irrelevant to the FDIC's expected long-run recovery rates. Yet, it may boost short-term prices by creating bond insurance liabilities that will come due several years down the road. If the private investor can increase the value of the toxic loans through non-contractible investments, then the public equity stake and subsidised leverage may hinder the FDIC from obtaining the best recovery rates from these troubled loan portfolios.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Monetary Economics and Finance.

    Volume (Year): 3 (2010)
    Issue (Month): 3 ()
    Pages: 300-309

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    Handle: RePEc:ids:ijmefi:v:3:y:2010:i:3:p:300-309

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    Web page: http://www.inderscience.com/browse/index.php?journalID=218

    Related research

    Keywords: banks; FDIC; federal deposit insurance corporation; LLP; legacy loans program; loans; mortgage securities; PPIP; public-private investment partnership; real estate; receivership assets; TARP; toxic assets; recovery rates; USA; United States.;

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    Cited by:
    1. Wilson, Linus, 2011. "A binomial model of Geithner's toxic asset plan," Journal of Economics and Business, Elsevier, Elsevier, vol. 63(5), pages 349-371, September.

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