In Washington, such comments are considered one step away fromofficial announcements. Indeed, the question for many has becomenot if but when.

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"FDIC was seeking a financial advisor as early as last August,"Kenneth Kohler, a partner at Morrison & Foerster, tellsGlobeSt.com. "So this has been percolating for some time. Thattells me two things: it is not on a fast track and the FDIC isserious about it."

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There are other, more fundamental questions as well, startingwith what shape this program will take—and whether the structurethe FDIC develops is one the private market can or will want tofollow. If past history serves as any guide, the answer to thelatter point would be a resounding yes.

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The FDIC, quite obviously, is borrowing a page from the RTC era,says Brian Olasov, managing director for the Atlanta office ofinternational law firm McKenna Long & Aldridge LLP. "The CMBSmarket grew out of what had been these non-performing commercialloan securitizations by the RTC.

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"The securitizations of non-performing loans from failed thriftsproved to be very successful—ultimately the bonds not offered tothe marketplace at the time were offered up in later years, whenthe market was more receptive. The government made quite a bit ofmoney from the later sales of those certificates."

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It is not that simple, however, to re-apply the old lessons.Much is dependent on two factors, Olasov says: "the rate of failedinstitutions and the cost of resolving those institutions relativeto the cost of securitization. That is an analysis that the FDIChas to make."

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Assuming it decides that securitization would be a net positivefor taxpayers, there is also the private sector to consider: wouldthere be demand for the paper and would the issuances jump startother transactions? DevelopersDiversified Realty Corp.'s well-subscribed, TALF-backed CMBSoffering last year would suggest that there would strong demandfor a FDIC deal.

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A FDIC securitization program would also provide a pool ofassets that can be used as the guinea pig for new proceduresdictated by the marketplace to return integrity to the securitizedmarkets, says Adam Weissburg, partner with Cox Castle &Nicholson. "One significant fallout of the capital crisis is thewidespread view that the securitization mechanism is flawed. Someperceived that rating agencies were not as diligent as they couldhave been," he tells GlobeSt.com. "Others that bankers were notappropriately incentivized because they had no economic stake inthe game but, rather, received income from the booking of a givenloan and its sale."

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"Unfortunately, it will be similarly difficult for lenders tooriginate 'securitization ready' loans without knowing thatultimately they can be sold in secondary markets."

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A successful FDIC securitization, Kohler and Olasov both say,would also deliver a strong psychological boost to the market."Certainly there is still a certain amount of demonization ofsecuritization that exists that would be offset by the government'sown endorsement," Kohler says.

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That boost, though, might be more subdued if FDIC actuallyguaranteed the securities—essentially equating them to Fannie andFreddie, he adds. "In a way it would be a slightly different marketproposition because they would seem to be more in the same class asgovernment securities."

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Furthermore in the short run, Kohler speculates, it could have aslightly negative impact depending on the terms and rates of thesecurities. "What we are talking about here is putting more supplyon the market and that should put pressure on prices in the shortterm."

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Whatever price fluctuations are introduced would be more thanmitigated by a strong sense of valuations that the market wouldreceive by a FDIC securitization program, Patrick Sargent, apartner in the Dallas offices of Andrews Kurth LLP, and presidentof the Commercial Mortgage Securities Association, tellsGlobeSt.com.

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FDIC securitizing its seized assets "will very likely bringmuch-needed stability and consistency to valuations and confidencefrom sidelined investors who are waiting to get back in themarket," he says.

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"The FDIC has a lot of product, which is unfortunate for thesystem, but it's important to get really close to valuations thatpeople will acknowledge as accurate. We're seeing widely varyingappraisal amounts. We've got to get 'price discovery' in order tofind out where valuations really are. Once people are comfortablewith that, there are many investors on the sidelines waiting forwhat they perceive to be the bottom and valuations that they canjustify."

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