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Buying banks' bad assets finally comes to fruition

WICHITA — It’s been nearly a year since the financial crisis began to take hold, causing the Treasury Department, Congress and then-President George Bush to unveil a series of efforts aimed at preventing a collapse of the nation’s financial system.

One of those proposed efforts that seemed to fade from the spotlight as quickly as it was mentioned was creating a system that would allow banks to get bad assets — primarily subprime mortgages — off their books.

The Federal Deposit Insurance Corp. said today that it has a winner of its pilot offering in the Legacy Loans Program.

Residential Credit Solutions bid more than $64 million in cash for a 50 percent stake in a limited liability company organized by the FDIC to hold a portfolio of mortgages with $1.3 billion in unpaid principal.

The FDIC said it “received various bids that were very competitive.”

The rub to all of this is the portfolio was from Franklin Bank in Houston, which regulators closed in November.

As this program moves forward, it hopefully will be used to buy bad assets from banks that are still in business, thus preventing them from failing.