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What happens to a Bank's debt assets, if it fails and goes belly up?
Banks loan out money to people, and people pay them back with interest. That is how they make money. The contracts are like assets, valuable assets.
Are these assets sold at a bargain price? Are only other banks that can buy them? Why cant the public buy them? Do these contracts ever get cancelled out leaving the debtors free and clear?
What happens to a Bank's debt assets, if it fails and goes belly up?
Banks loan out money to people, and people pay them back with interest. That is how they make money. The contracts are like assets, valuable assets.
Are these assets sold at a bargain price? Are only other banks that can buy them? Why cant the public buy them? Do these contracts ever get cancelled out leaving the debtors free and clear?
The contracts aren't canceled because they hold value
People can't bid because they aren't regulated by the same organizations that banks are or members of the FDIC
What happens to a Bank's debt assets, if it fails and goes belly up?
Banks loan out money to people, and people pay them back with interest. That is how they make money. The contracts are like assets, valuable assets.
Are these assets sold at a bargain price? Are only other banks that can buy them? Why cant the public buy them? Do these contracts ever get cancelled out leaving the debtors free and clear?
Are you talking about a bankruptcy liquidation? Normally the trustee would distribute the assets to the bank's creditors and/or FDIC (to compensate for covering depositor losses).
When the F.D.I.C. seizes a bank, it takes over the bank’s bad assets, pays off some of its debt, and resells the cleaned-up institution to private investors.
When the F.D.I.C. seizes a bank, it takes over the bank’s bad assets, pays off some of its debt, and resells the cleaned-up institution to private investors.
Usually, there is a deal between the FDIC and another bank in the vicinity to take over the bank. That deal may or may not include some or all of the assets - most of which are outstanding loans. Those assets not taken by the acquiring institution have to get liquidated by the FDIC.
If no stable institution in the area is willing to take over the bank, then the FDIC has to seize the whole bank, pay off the depositors and liquidate all the assets.
FDIC tries to liquidate assets smartly. Performing notes are either held at the agency (usually short term) or sold for somewhere around $.90 on the dollar or so. Non-performing assets are sold for something less.
(Sometimes, performing loans became non-performing loans the instant a bank fails. I used to run fraud cases against those loan recipients.)
If memory serves, the FDIC teams usually move in at the end of the business day on Friday just before the target banks close, and come Monday the new bank is pretty much open for business. I'm sure ATM machines and online banking have changed that somewhat.
Usually, there is a deal between the FDIC and another bank in the vicinity to take over the bank. That deal may or may not include some or all of the assets - most of which are outstanding loans. Those assets not taken by the acquiring institution have to get liquidated by the FDIC.
If no stable institution in the area is willing to take over the bank, then the FDIC has to seize the whole bank, pay off the depositors and liquidate all the assets.
FDIC tries to liquidate assets smartly. Performing notes are either held at the agency (usually short term) or sold for somewhere around $.90 on the dollar or so. Non-performing assets are sold for something less.
(Sometimes, performing loans became non-performing loans the instant a bank fails. I used to run fraud cases against those loan recipients.)
How does the FDIC liquidate the debt asset? They just sell to another bank? Do they ever offer the debtor to pay it all off at once?
The contracts aren't canceled because they hold value
People can't bid because they aren't regulated by the same organizations that banks are or members of the FDIC
What kind of regulations do you need though? I mean, banks can short sale a house to people, or a boat.
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