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The FDIC has authority to take banks into receivership and liquidate them. Citgroup is not a bank - it contains multiple non-bank and non-US bank parts. In theory, FDIC could have taken over the US bank, but it has no authority to hold and manage the assets - which is why the US created the RTC during the S&L crisis of the 1980s. FDIC practice is to take over as it sells the bank assets to an existing bank  - and there were no candidates to absorb Citi. And doing so would have caused the enclosing corporation to crash with no regulatory authority to take it over and manage it. And the record shows these FDIC takeovers have usually cost the FDIC about 20% of assets, which would have been a whole lot more than the US has actually spent on Citi.

So: aside from FDIC receivership being, partial,impractical, panic inducing, and vastly more expensive, it would have been a great idea.

by rootless2 on Sun Dec 20th, 2009 at 09:00:30 AM EST
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