New private capital for failed banks

The WSJ reports that some fairly heavy money is forming blind pools to take over failed banks. The FDIC is making favorable noises about this development but what I see as significant is that it will open the door for the feds to take more banks off life support faster. Right now, there are a few private equity groups trying to buy a select group of banks that have decent assets but banks with rotten portfolios (Patriot Bank comes to mind) are drawing no bidders and so they remain zombies – walking dead. If these blind pools can take on handfuls of failed banks at a time, the fed could slip a few losers in with the better ones and sell it as a package. If that happens, watch for even more properties to hit the market at hugely discounted prices.

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