Because they know all they sold ya was a guaranteed piece of shit. That's all it is, isn't it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I've got spare time.
Before the financial crisis is unwound, the Federal Deposit Insurance Corp. expects to have taken over some 300 failed banks. The rapid closures have drained the agency's cash reserves.
The FDIC must sell assets to continue the closings. It has about $37 billion of bad-bank assets to sell, but the stockpile would bring only 10 to 50 cents on the dollar.
Enter the FDIC's Securitization Pilot Program, the sale of U.S.-guaranteed FDIC senior certificates. This enables the FDIC to push much of the losses off its books, thanks to the U.S. guarantee of principal and interest. The program starts with a $500 million issue.
And who makes up the losses? The notes are backed by loans that are bundled into agency-administered pools. But ultimately, the losses could be absorbed by Uncle Sam.
Problem: the assets aren't worth much - 10c-50c on the dollar, according to Barrons. Solution? Mark that box full of crap GUARANTEED! Remember, the FDIC is supposed to be funded by the banking industry. How then, do they get a government guarantee? Of course, with the guarantee, the assets will sell for a price much higher than 10c-50c, after all, it's GUARANTEED by the USA! So, the FDIC gets paid a much higher price, and who eats the losses? Uncle Sam, of course. The FDIC is supposed to be an agency that is self-funded by the institutions it insures. From an old Bloomberg article:
Our operating budget does not come from taxpayers,” Bair said during the meeting. “We are completely self-funded in that regard.
They aren't really selling the bad assets. They're selling the equivalent of a Treasury bond without congressional approval," says William Black, a former thrift regulator. "It hides the economic substance of what's really happening—an unlimited taxpayer bailout.
The FDIC contests the characterization, saying it doesn't expect a claim on the guarantee because of an equity cushion to absorb the losses, and the use of only performing mortgages in the pools. The agency says a lot of resources stand between it and the taxpayer.