FDIC May Run ‘Bad Bank’ in Plan to Purge Toxic Assets (Bloomberg Update)

[chill_wind]

FDIC May Run ‘Bad Bank’ in Plan to Purge Toxic Assets (Update2)

By Robert Schmidt and Alison Vekshin
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Jan. 28 (Bloomberg) -- The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up as it tries to break the back of the credit crisis, two people familiar with the matter said.

U.S. stocks gained, extending a global rally, on optimism the bad-bank plan will help shore up the economy. The Standard & Poor’s 500 Stock Index rose 1.9 percent to 861.63 as of 9:54 a.m. in New York. Bank of America Corp., down 54 percent this year before today, rose 87 cents, or 13 percent, to $7.37. Citigroup Inc., which had fallen 47 percent this year, climbed 18 percent.

FDIC Chairman Sheila Bair is pushing to run the operation, which would buy the toxic assets clogging banks’ balance sheets, one of the people said. Bair is arguing that her agency has expertise and could help finance the effort by issuing bonds guaranteed by the FDIC, a second person said. President Barack Obama’s team may announce the outlines of its financial-rescue plan as early as next week, an administration official said.

the rest: http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=avQ3LP7o44oU