FDIC Requests Public Comment On Legacy Loans Program

The Federal Deposit Insurance Corporation ("FDIC") has

requested public comments on all aspects of its proposal, announced

on March 23, 2009, to remove troubled "legacy loans" and

other assets from banks' and thrifts' balance sheets by

creating Public-Private Investment Funds ("PPIFs") to

purchase them.

See Enlisting Private Equity to Rescue "Legacy

Assets": Treasury Announces Public-Private Investment Funds

Structures, 21st Century Money, Banking & Commerce

Alert® (Mar. 25, 2009). The FDIC has announced its intention to

launch this program as quickly as possible. The

deadline for providing public comments is

Friday, April 10, 2009.

The FDIC request includes 17 multiple-part questions. The

request for comments and the preliminary program descriptions that

have been released indicate the great breadth and depth of the open

issues that must be resolved before the first PPIF is organized and

the first legacy loans are purchased.

Among the issues highlighted in the request for comments is the

fundamental question for private investors of what the relative

role of the government and private investors will be in the

selection and oversight of asset managers. In this regard, although

not addressed in any of the materials released to date, the FDIC

has indicated that Legacy Loan PPIFs would be subject to the

federal government's loan modification program.

The FDIC appears to be very receptive to receiving private

sector input to make the Legacy Loans Program as...