The Federal Deposit Insurance Corp. is working furiously on many fronts to fulfill its mission: buttressing-or not, as the case may be-the solvency of the country’s banks. In the case of the latter, the FDIC’s marching orders then become to dispense of the seized assets as productively as possible on behalf of us taxpayers. One byproduct of the agency’s involvement in the market is that distressed debt valuations have become less- than – transparent.

Lessons from Lennar Consider, for example, builder Lennar Corp.s foray into the distressed market. In mid-February the home builder turned-distressed investor acquired a portfolio of 5,500 residential and commercial real estate loans in a FDIC auction. Lennar paid $243 million for a 40% stake in the properties-with the remainder held by FDIC. Commentary in the Wall Street Journal on the transaction said the deal showed that while the FDIC wasn’t selling assets at rock-bottom prices it proved willing to subsidize the sale. Arguably, because FDIC provided zero financing and kept a significant stake in the project, Lennar could have afforded to pay more. Thus the market still has no clear-cut idea of the value of that particular portfolio.

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