Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash

When traditional sources of capital are no longer politically feasible, i.e. lines of credit from the Treasury or direct taxpayer bailouts, other sources of capital will be tapped to buy the toxic assets now on the FDIC books. Public pension funds already slammed by this stuff are being courted as potential buyers. It's unlike that most retirees would favor this move.

The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system, said people briefed on the matter.

“The FDIC is constantly looking at structures where we can get the greatest opportunity to tap into capital that we have not had the success reaching through previous disposition methods,” FDIC spokeswoman Michele Heller said in an e-mailed statement. “We welcome and work with all investors.”

Source: bloomberg.com