The real reason the RTC does so poorly in deposit sales - and the FDIC can be faulted on these grounds, as well - is obsession with fairness in the bid process. Neither the RTC nor the FDIC does ...this. Generally, they say: "This is how we will structure the deal." They never say: "This is the price we want." Again, the FDIC is to be faulted less than the RTC in this regard, especially as deal size rises. Harmful Rigidity At least, however, the FDIC is on the right track. Consider the recent New Hampshire transactions, in which the FDIC simultaneously closed five institutions with combined assets of approximately $5 billion. Various advisers assisted the failing banks to structure closed-bank bids, even though the cost of this work ultimately was borne by the FDIC.
Open-bank assistance gave the FDIC a negotiating lever by which it could require the holding company to merge its good banks with its troubled bank or banks, in return for FDIC aid to keep the ...troubled one open. # Whether the FDIC buys the nonperforming assets for cash or notes (and what is the composition of cash versus FDIC notes) and whether the FDIC creates a segregated asset pool on the books of the resultant institution. In effect, the FDIC has signaled that it believes open-bank transactions can be crafted in ways that minimize the cost of FDIC assistance and that a reasonable expenditure of effort (and ultimately FDIC funds) should be made to craft such bids.
Many bankers will want to consider the following questions before proceeding with such an acquisition: Why should I consider acquiring a thrift? What should I look for and what should I avoid in ...examining a thrift for acquisition? What would I do with a thrift? 6. Federal Home Loan Bank advances. Some bank buyers may view access to the Home Loan Bank System window as positive. In such cases the thrift acquisition will need to be structured carefully so the institution will continue to meet the qualified thrift lender test embodied in the thrift bailout law. Under the thrift bailout, banks have an almost limitless number of options: They may acquire any thrift, stock or mutual, good or bad, anywhere. They may hold the thrift in a separate thrift charter or merge it into a new or existing bank subsidiary.
BANK HOLDING-COMPANY REGULATION POSES IMPORTANT PROBLEMS FOR SCHOLARS AND REGULATORS ALIKE. THE ANTITRUST ISSUES HAVE RECEIVED CONSIDERABLE ATTENTION, LARGELY AS A RESULT OF THE BANK MERGER MOVEMENT ...THAT PRECEDED THE MORE RECENT BANK HOLDING COMPANY MOVEMENT. NEVERTHELESS, THERE REMAIN GAPS IN UNDERSTANDING, PARTICULARLY IN THE AREAS OF POTENTIAL COMPETITION AND SCALE ECONOMIES. ISSUES RELATING TO THE EFFECTS OF BHC AFFLILATION ON BANK SOUNDNESS REQUIRE MORE ANALYSIS. OVER-ZEALOUS REGULATION AIMED AT MINIMIZING THE POTENTIALLY ADVERSE EFFECTS ON BANK SOUNDNESS COULD DESTROY MUCH OF THE SOCIAL BENEFIT ASSOCIATED WITH THE BHC DEVICE. HOWEVER, IT IS IMPORTANT TO BE ALERT TO THE POSSIBILITY OF SEVERE DISRUPTION STEMMING FROM FINANCIAL PROBLEMS OF BANK HOLDING COMPANIES. APPROPRIATE STANDARDS MUST BE DEVELOPED FOR REGULATION. TABLES. REFERENCES.
