FDIC Asks Pension Funds to Step In

As the FDIC seeks cash, pension funds may be asked to help foot the bill to rescue the banking system.

(March 9, 2010) — The Federal Deposit Insurance Corp. (FDIC) is trying to urge public retirement funds to help boost the banking system by buying failed lenders, reflecting the growing importance and power of asset owners.


Regulators are increasingly seeking the support of pension funds, whose 100 biggest members manage $2.4 trillion, to solve the continuing banking crisis. While regulators have viewed private-equity firms as a last resort on fears they hold too much risk, pension funds could provide a more reliable source of capital, the wire service reported.


According to Bloomberg, the Oregon Public Employees Retirement Fund fund may contribute up to $100 million, buying stakes in several of the nation’s 700 troubled banks, with pension funds in New Jersey, California and New York also open to participating.


“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 to Bloomberg. “We welcome and work with all investors.”


In 2009, the FDIC closed 140 lenders, and they expect the number to be even higher in 2010, as 26 U.S. banks have failed so far this year. Last month, the FDIC said that it had included 702 banks with $402.8 billion in assets on the confidential “problem” list as of December 31. The number represents a 27% increase from the third quarter.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742