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Mamradpivo's avatar

How does the FDIC determine which bank to transfer seized assets to?

Asked by Mamradpivo (9655points) July 31st, 2010

So, a bank here in town was seized by the FDIC yesterday. They’ve been troubled for a while, I don’t think this is a surprise. But their assets were transferred (sold?) to a bank in Boise. All locations will reopen Monday as the new Idaho-based bank.

I wondered this when the giant banks were failing, but I assumed that Wamu was sold off to Chase due to bribery and back-room dealmaking. I still believe that was the case for the giant banks in 2008.

But how did the FDIC decide to transfer/sell the deposits of the customers of a bank in Oregon to a bank in Idaho? What criteria do they use? Is there an auction? A lottery system? A list of healthy banks that would be a good fit for troubled banks?

Anyone have any ideas, or can you point me to an article that describes the process?

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1 Answer

laureth's avatar

The troubled bank’s assets are sold to the new owner. I’m not sure if they choose the highest bidder, though, or what methodology they use to choose which bank gets to buy the assets. I’ve heard tell of banks shut down, though, and years later still unsold.

This article tells a bit.

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