the social scientist.

RTC: Creating a Big Bad Bank

I think the previous RTC came about because the FSLIC didn't have the money to cover the insured deposits at the bankrupt savings and loans. When the S&L's went under the RTC ended up with all those bad loans. They presumably got the money from the foreclosed properties that were sold, and they sold the outstanding notes on commercial property for pennies on the dollar. Why it cost them $400 billion beats me.

So would a new RTC be intended to bail out the FDIC, and take over the loans of bankrupt banks? or would it be along the lines of what Cramer suggests - that they enter the market and buy the bad paper at market rates? Either would take an Act of Congress, but they would go along. The risk then is, since since they're replacing those loans with Treasury debt, will foreigners still buy Treasury debt? And will my yuan go up or down?