OPERATOR: You're welcome, and thank you for standing by.

At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question and answer session. At this time, if you would like to ask a question, you may press *1.

As a reminder, today's call is being recorded. If you have any objections, please disconnect at this time.

I'll now turn the call over to your conference host, Mr. Andrew Gray.

Sir, you may begin.

ANDREW GRAY: Good afternoon, you have reached the FDIC's conference call for investors on the Legacy Loans Program. I would mention that this call is for investors, it is not meant for the media. If there are representatives of the press on this call, there should be no attribution or other use of this information, you are participating in an off-the-record capacity. I'll make several reminders of that over the course of this call.

In a moment, we'll begin the call with opening remarks from FDIC Chairman Sheila Bair, and then the FDIC Chief Operating Officer John Bovenzi will provide an overview of the program. We will then open up to a question and answer session that should last until 1:00.

With those details out of the way, I would turn it over to FDIC Chairman Bair.

CHAIRMAN BAIR: Thank you, Andrew, and welcome everyone, thank you for joining us this afternoon.

As I'm sure you are aware, on March 23rd, Secretary Geithner announced the Legacy Loan Program. It was one of two troubled asset acquisition programs he announced on March 23rd, the loan program being administered by the FDIC.

I assume you're generally familiar with the outline of the program, the term sheet is on our website, if you've not had a chance to look at it already -- the proposed term sheet -- we're out for comment.

The goal of the program, obviously, is to help cleanse bank balance sheets of some troubled assets and thaw the credit markets, bolster bank balance sheets to further support their ability to lend, to support the economy.

We have are proposing to construct a program so that all banks, large and small, can participate and sell assets into the program.

Our initial focus, we think, will be the legacy real estate-related assets, the mortgages and commercial real estate. That's an area where we're seeking comment, and as interested investors, we appreciate your input.

As you probably are aware, the capital investments will be provided by a combination of government and private funding with the FDIC providing guarantees for loans to provide some responsible level of leverage. And again, we seek input on the appropriate division of government and private capital investments, as well as leverage constraints.

Just as we want all banks to be able to participate, we want a wide participation by investors, as well, including individuals and mutual funds, pension plans, insurance companies and other long-term investors. For regional investors, though, obviously we want to make sure that the -- whatever type of participation they would have would be suitable. So, input in that area would be very helpful as well.

But we do welcome and encourage the private investment component of this. We're looking to not only just help leverage resources, but also to provide an important pricing mechanism. [Indiscernible] price discovery really will be the success of the program.

We are out for comment until April 10th, and so I'd encourage you, if you have not already done do, to go to our website and look at the proposed term sheet, as well as the list of questions that we proposed. We would like to get the program up and running as quickly as possible, so time is of the essence.

So, please -- we'll be trying to answer your questions today and hearing some of your comments and give us your best thinking and give us comments before April 10th.

We don want to focus, obviously, on this call -- specifically on the investor prospective, and so I've invited a number of our senior staff today to join me on this call, and with that, I will turn things over to John Bovenzi, our Chief Operating Officer, who will present a more detailed overview of the program.

John?

JOHN BOVENZI: Thank you, Chairman Bair.

Good afternoon. It's -- what we'd really like to accomplish today is to get as much information from all of you that we possibly can. We have a number of important issues to address in the upcoming weeks in constructing the details of this program, and we really want your participation and involvement in giving us your thoughts so we can put the best possible program together.

This is our second conference call, we had one for bankers a little earlier, and certainly participation by anyone is welcome, even though this is designed mostly for investors on this particular call.

As Chairman Bair has stated, we've put some questions out for comment, we have a comment period that ends tomorrow, and if you haven't sent in comments, and if you don't get a chance to give us your comments on this call, please do so through our website.

We will be putting up all of your comments publicly on that website, so you'll be able to see what kinds of comments we are receiving. We do want this process to be as open and transparent as possible, so all of those comments will be posted.

What will happen - there will be transcripts of this conversation that's taking place today, and there is a transcript of the earlier conference call we had with bankers, a little bit earlier.

And so, in the weeks that follow, we'll be addressing all of the particular parts of the program, how it will be structured, how it will operate, and we'll put that information up on our website, as well, as we get those particulars. It will probably take a question and answer format, but we will be describing the details as they become available.

So, we are looking for your input today, in a number of different areas. The first area that we've asked for comments on is related to who can participate in the program. From a seller's point of view, it's open to all insured depository institutions -- banks and thrifts of all sizes and we'll be looking for thoughts on the mechanism for how to encourage small bank participation, as well as larger bank participation on the selling side.

In terms of assets, you know, what types of assets should be in the program? What should be the size of the pools? And if we start with some initial sales, where should we focus on the types of assets in those initial sales?

For you investors, we are looking for a broad range of investors, individuals, mutual funds, pension plans, insurance companies, long-term investors -- we want this to be as open as possible for those who would like to participate in the program.

The FDIC will also be hiring a number of contractors to help us -- in structuring a program, managing the program, providing oversight, and we will be registering contractors and going through competitive processes to hire people to help us in that regard.

So, part of what we will be doing in constructing this is determining what kinds of conflict standards we may have; if you participate in one part of the program, will you be able to participate in other parts, or where -- clarifying the rules for you in terms of how that will work.

Beyond participation, the sales process we're needing to develop the specifics for in the weeks ahead, as asset pools are identified, the FDIC will do an independent evaluation of those pools.That will help us determine the amount of leverage we want in any specific pool, and that -- as has been stated -- can be up to six-to-one leverage, and may be deal-specific. Then there will be a competitive bidding process. We're looking for input on the type of competitive bidding process we should have, but as investors, if you see a pool of assets that you've analyzed and you bid $100 for that pool, then we're expecting that Treasury is going to match that $100, and if the leverage that the FDIC determines is four-to-one for a particular pool, then there would be another $800 in debt, and so the purchase price of those assets would be $1,000.

That debt is guaranteed by the FDIC, so there will be a fee associated with that guarantee, so that will be part of the terms of a specific deal on what the guarantee fee is.

And we're looking for comments on the type of debt -- should it be publicly issued? Should it be publicly issued -- and then cash given to the bank when they sell, or should it be a note given back to the bank?

And the terms of that note -- how quickly is it paid down, and is the FDIC paid back on the note, or the guarantee eliminated -- and to what extent should investors be getting cash flow as that's happening?

There are a variety of asset servicing issues, there will be certain conditions placed on servicers and in particular we'd be looking for servicers to use the government's loan modification standards, and there may be other requirements, as well, basic standards on just how to manage the assets, and we'll be setting up an oversight process and there will be reporting requirements that will be necessary, as well. All of this we want to be as transparent as possible, and make it all very clear to people how the program is going to be run, and what the expectations are.

And at the end, we need an exit process -- how long does this program go on, and how do we ramp up the public/private investment partnerships at the end of the day?

So, there are a number of issues that we are seeking your advice on, and your comment, and hopefully we can use this, this hour to get as much information as possible from you.

So, that said I am here with a number of FDIC staff members who are helping to construct the program so that they can hear what you have to say, and take that input into putting together the particulars of the program, and we'll call on them for particular questions you might have, but please understand, because this is a comment period and the desire for input, you won't have a lot of specific answers to details, and we would really like if you have a question in a certain area, your thoughts on how we ought to answer that question.

So, with that opening let me turn it back to Andrew Gray to open up for questions and comments.

ANDREW GRAY: Sure, and I'd just make a comment to any folks who may have joined the call late -- this is directed to media -- this call is not for attribution, it's meant for investors, so just to put that disclaimer out there.

With that, we can move to the first question.

OPERATOR: [Indiscernible] of American Continental Group, you may ask your question.

MALE SPEAKER: I was wondering about the time estimate for the notice and comment rulemaking going forward, and also about any charges, whether they would be nominal to cover FDIC costs or tied to profits or arranged in some other fashion.

JOHN BOVENZI: Well, the comment period actually runs out this week, so we've been trying to expedite that to move the program forward as quickly as possible, if that was what you were referring to in the first part of your question.

And the second part, the guarantee fee, we would expect to cover a large part of the operational costs that we'll have in providing the oversight and putting the deals together, but at the same time, we do want to hear thoughts on that as well.

MALE SPEAKER: My question wasn't really about the comment period ending tomorrow, but about going forward. I know that this comment period was not noticed in the Federal Register, so when I talked to somebody else at the FDIC today, they said that there would be another comment period for some of these details that are still to be fleshed out.

JOHN THOMAS: Well, if the FDIC promulgates the regulation, which we haven't made a final decision, that's certainly a likely possibility, then there would be a comment period for the regulation. That, as before said, would be published in the Federal Register.

MALE SPEAKER: But is there any indication of whether this will be a month from now, or two months from now?

JOHN THOMAS: In terms of precise timing, no.

MALE SPEAKER: Okay.

JOHN THOMAS: Soon, but we are hoping to learn a fair amount from the informal comment period that closes tomorrow from calls like this and move forward as promptly as we can.

MALE SPEAKER: Thank you.

OPERATOR: Frank Scavoni, you may ask your question. Please state your affiliation.

FRANK SCAVONI: I am a potential investor with CREI. I'm looking -- I have multiple questions, here, the first is, are you considering any sort of match-term financing, considering that many of the loans will likely need restructuring due to an over-leveraged status. And in that match-term financing, would you be contemplating restructuring into longer term fixed-rate financing, that's my first part.

My second part, is it thought that the guarantee fee will reflect the performance or the capabilities of the investor? Meaning, if someone has a better platform, or a more capable platform of managing these positions, will that be contemplated in what the guarantee fee will be?

JIM WIGAND: Hi, this is Jim Wigand, and let me respond to your first question.

With respect to the management of the loans that are in each individual fund, it is anticipated that the controlling partner will make a determination as to what is the best resolution, or what type of restructuring, if you will, results in the best return in the interest of a fund within the parameters set forth in the deal documents.

And as John Bovenzi indicated earlier, there will be certain restrictions or covenants included in the deal docs, which would basically encourage or require certain types of activities or services to be performed with respect to the portfolio.

Regarding your second question, the guarantee fee is not going to be based on the skill sets being brought by the managing or controlling partner, but rather on the underlying characteristics of this portfolio, as well as what John indicated earlier, a component to reimburse FDIC for its oversight costs in administering the portfolio.

FRANK SCAVONI: Thank you.

OPERATOR: Our next question comes from Gerard Tunny, please state your affiliation.

GERARD TUNNY: It's Gerard Tunny with True North Management Group, and we're on the -- we're a potential bidder.

I actually have two questions, if I may, first, in general, what will be the qualifications for bidders, and second, if you could maybe describe what is envisioned on a partnership agreement with the Treasury in terms of control and major decisions and that sort of thing.

JIM WIGAND: Well, with respect to both of your questions, these are items that we have out for comment and soliciting your input with respect to both investor qualifications.

As the Chairman indicated in her opening remarks, we are soliciting participation in the program from a broad range of investors, and if one thinks that through somewhat, recognize that different levels of investment, and whether it's active or passive investment will result in different types of qualifications for that particular investor. But we are soliciting comment with respect to investor qualifications.

Can you repeat your second question?

JOHN BOVENZI: I'll take the second question. I think in terms of the relationship between the FDIC and Treasury, we're going to be working with them in terms of division of duties and exactly how things get done so that from the investors' point of view, it can be pretty clear what the expectations are, and who they're going to be working with.

We expect that FDIC will have much of the role in terms of managing the process and providing the oversight, but certainly how that's going to be done will be worked out between the FDIC and Treasury.

GERARD TUNNY: Well, in terms of the partnership with the Treasury and the private investor, it was put out there right now as a 50/50 split. Does that also suggest a 50/50 in decision making? Or will the private investor primarily have the driving force of major decisions?

JOHN BOVENZI: The expectation is that the private investor will have the driving force in major decisionmaking; that it's really what we're looking for in the program is to get the private sector to help in terms of the pricing, and in terms of the management of the assets, in order to maximize value.

What we intend to do with Treasury is provide the ground rules for how you would do that, and the oversight and a process, so there will be certain reporting requirements and other things that would go along with the program that would work out with the Treasury so that they have the information they need to protect the taxpayers' interests.

JIM WIGAND: I just wanted to add to John's comments that we would include in a bid package what those requirements would be. So, an investor which is bidding on a particular fund would know the terms of exactly how that servicing and decision making would be set forth for the management of the assets under that fund.

GERARD TUNNY: Okay, thank you.

OPERATOR: Thank you.

Our next question comes from Owen Mackdabanow, you may ask your question, and please state your affiliation, sir.

OWEN MACKDABANOW: My name is Owen Mackdabanow from Venue Property Solutions.

My question specifically has to do with the exit strategies allowed for these investors. Usually, with [indiscernible] an investor has about 6 exit strategies, which include from selling the note to another investor, like doing a refinance, or short sale, in lieu of a proposal.

Finally, we're doing a performing -- [indiscernible] performing.

My question now is, if you get the money out, that is money from the FDIC, and equity money from the Treasury, what kind of restrictions are going to be put on the investor in regards to executing the exit strategies available?

JIM WIGAND: As I had indicated in the earlier comments, there will be set forth in the deal documents certain covenants and provisions with respect to how the assets should be managed, and they're going to vary from the type of asset pool in a particular fund.

So, one would expect that the single -- a single-family pool, for example, would have different management requirements than a pool of land loans, for example.

But the restrictions and provisions, or Covenants, would be known up front, they'd be set forth in the deal documents, and that would be something which an investor would be able to view prior to bidding.

And as John Bovenzi indicated earlier, the objective of the program is to actually capture not just an investment by the private sector of capital, but also the expertise and skills being brought by special servicers to manage the portfolio in a fashion that results in a maximization of value with respect to those underlying assets.

OWEN MACKDABANOW: Okay, my last question in regards to -- besides getting the money for the purchase of the assets, would there be any special programming with regards to getting working capital? Because I'm sure you're aware that there's several additional costs that goes -- involved when you're trying to manage notes.

JIM WIGAND: With respect to the characteristics of each asset pool within a fund, there may have to be some type of provision set up for working capital. Obviously that will vary depending on the nature of the credits, if they're open or closed, and whether or not there are other cash-flowing assets within the pool.

So, this will be very much a case-by-case driven type of specification.

OWEN MACKDABANOW: Oh, okay, thanks.

OPERATOR: Thank you, our next question comes from Mr. Mike Mayo.

You may ask your question.

MIKE MAYO: [Indiscernible].

OPERATOR: I'm sorry, Mr. Mayo, we're unable to hear you.

MIKE MAYO: [Indiscernible].

OPERATOR: Sir, could you please pick up your handset?

We'll move on to our next question, Mr.Bill Campbell, please state your affiliation, your line is open.

Bill Campbell: Hi, this is Bill Campbell with the law firm of Stroock & Stroock & Lavan , and I have two questions.

In the summary of terms that was issued for the Legacy Loan Program, it was mentioned that the Treasury would receive warrants in connection with its equity investment in the PPIF. That appears to be consistent with the requirement under the TARP legislation that passed last fall. I just wanted to know what these warrants would provide for-- whether they would give the Treasury the right to receive profits in the PPIF beyond their pro rata share, or any greater right of control.

That's essentially my first question.

JOHN THOMAS: Treasury will have to make the ultimate decision on the warrants, but my expectation is they would not change the control of the entities, but almost by definition, if there are warrants, there would be at least some possibility about changing the economic split, to a degree.

I don't think Treasury is contemplating something that would radically change the economics because of the warrants, but it is -- Treasury will be the one who makes the final decision, of course, that will be known before investors are bidding.

BILL CAMPBELL: Okay.

And then on my second -- my second question is on -- commercial real estate, what are the eligible assets anticipated to be -- are they only going to be mortgage loans, as opposed to, say, things like mezzanine loans? Would they include REO?

DAN FRYE: This is Dan Frye, right now we are opening it to all commercial, or real-estate backed credits, so we would contemplate, as we go forward, we may start out with more simpler structures, closed-end deals, but then move on to construction loans, and we could progress into ORE, as well.

So, we'll look at that as we go forward, and as many have said, the comment period's out there, and we're looking for your input on eligible assets, as well.

BILL CAMPBELL: But just to circle back, would it include something like a mezzanine loan? Like a loan secured by equity, in a property owner, as opposed to a direct mortgage on property?

DAN FRYE: At this stage, I really can't answer that question, I think we need to look at all of the comments that come in before we look at that specific asset class.

BILL CAMPBELL: Okay, thanks very much.

OPERATOR: Mr. Mike Mayo, your line is open?

MIKE MAYO: Hi, can you hear me now?

OPERATOR: Yes, sir, please state your affiliation?

MIKE MAYO: Okay, CLSA -- two simple questions, then a hard one, I guess.

So, for commercial real estate, when commercial real estate loans are sold, who will service those assets? Because it's my understanding there's some practical limitations in transferring the servicing of commercial real estate from one party to another?

JIM WIGAND: The expectation is that the servicing rights actually will ultimately be conveyed to the [indiscernible] for the Fund. There will be a sub-servicing agreement that is entered into between the fund and the selling institution. The timing of the transfer of the servicing rights will kind of depend on what structure is ultimately adopted, but it is contemplated that ultimately, as I indicated, these loans will be sold, servicing released.

MIKE MAYO: And then the second question - - the guarantee, the fee in return for the FDIC guarantee on the loan -- that will be enough to cover the operating costs, but would it be enough to cover the potential losses that result from the FDIC guarantee? I think what I've read in the press is, it would not be, and therefore if there's losses due to the FDIC guarantee, that would be an increase in the deposit insurance premium.

So, if you could validate what I'm saying, or correct me?

MALE SPEAKER: Hello?

MIKE MAYO: Yeah, I'm here.

ART MURTON: If I understood the question, the question is, what happens if the losses from the guarantee program exceed the fees collected?

MIKE MAYO: That's correct.

ART MURTON: Yes, then the law requires the FDIC to recover costs through a special assessment on the banking industry. This is outside of the regular assessment, it is not -- it does not hit the deposit insurance fund, and as you may know, the special assessment is based, essentially, on liabilities as opposed to our normal assessment base of deposits.

MIKE MAYO: Okay, I mean, just my two cents worth, I don't know why a small, community bank would have to partially pay for the mistakes of some big banks with the toxic assets, for whatever that's worth.

And then the tough question, in other words, why not just increase the fees right up front to build more cushion for potential losses there?

But the tough question is, is this program too hard? And is it too soft? And is it too hard because if the FDIC forces banks to sell assets, even with the leverage that you're getting in the program, there could be enormous write-downs, causing big capital holds, so is that a little too hard, or is it too soft, in the sense of, well, if banks don't want to sell, they just might not sell any of their loans, because they think it's worth a lot more and why create a big capital hole?

How do you balance those two extremes, in other words? Like, in other words, banks might now want to sell, because they don't think they can get their price. On the other hand, we all want to just, you know, bite the bullet and face reality and maybe force some sales, if we have to.

JOHN BOVENZI: Well, I think in terms of bank participation, hopefully banks will find this in their interest, and be willing to come forward to sell certain assets. They will be working with their supervisors with this process, that this is one more mechanism banks have to try to address issues that they may have on their balance sheets, so they will be working with supervisors.

And in terms of, you know, consummating the sale, part of the project design will have to be how to make this work for both the buyer and the seller in terms of the mechanics, helping to ensure that there will be a sale at the end of the day, so that if investors put time and money into a process, we can get a deal done and that the bank has a sense of being able to obtain a certain price for what they're selling assets for.

So that will be part of the design of the program, as we go forward, and how to best make that happen.

MIKE MAYO: Okay, and then last follow-up, it seems like those banks which sell or, you know, work with the regulators who encourage some selling could be penalized more, versus those that don't sell.

So, one proposal that I heard was, just, you know, mark it all down, and then amortize the losses over seven years.

So, it's just -- and I think that would work within the confines of the current program, without penalizing banks so much up front, but at least facing more of the reality of what some of the assets are worth.

In any event, thanks for holding this call.

ART MURTON: Hey, I just want to go back on that [indiscernible], after my response you said why don't we just raise the fee? We fully expect and plan to set fees so that they will cover our expected costs of any losses under this.

MIKE MAYO: And I might have -- you know, I might have read the paper wrong, but I thought I saw somewhere -- it might have been in the NYT a few days ago where it said you didn't expect losses as a result of that FDIC guarantee.

ART MURTON: That's right.

JOHN THOMAS: That's net of all fees.

MIKE MAYO: Okay, so you're just saying what you -- okay. You're expecting to increase the fee enough to cover any losses on the guarantee.

ART MURTON: We expect that the first protection is the price, because we're getting a market-based price that fees will not go to pay for them, and then we are going to have the protection from the equity investors, and then we have fees from the closings, so those are the three things that cause us to expect that overall, the program will not have a net loss.

JOHN BOVENZI: And also to be determined, how the cash flows do pay down the note, and how quickly. So, we'll try to build a number of protections in to keep from having to have any assessment done on the bank industry.

MIKE MAYO: All right, thank you.

OPERATOR: Thank you.

Our next question comes from Mark Wolf. Please state your affiliation?

MARK WOLF: Yes, I'm with TRI investments, and we're a potential bidder, and I've got a couple of comments and a question, and I wanted, actually, to reinforce one of the recent comments about too hard and too soft, with regard to the program.

You know, Alan Greenspan demonstrated a real lack of understanding of human behavior, and I'm worried that this program also falls afoul of the same problem.

And that is, you are very likely to get banks dribbling out non-performing assets on an incredibly slow basis, the way this is set up. Because each bank is going to have to write down the losses associated with each sale, and you also give them the opportunity to put all of us -- that's one of my concerns, all potential investors -- through the process of evaluating a pool of loans, making a bid, going through the entire bidding process -- you've got a winner in the auction, and the bank can decide that they're not getting enough money, and walk away from -- at least that's the way I understand the program -- they can walk away, then, from the auction.

I think that the suggestion that the FDIC, or that the government adopt a longer-term, in which they can write off these losses, makes an incredible amount of sense, because if the idea is to quickly revive -- or at least help revive the system -- by getting rid of a lot of these toxic assets -- unless you've got a process that either forces banks to sell or does a better job of encouraging them to sell, we're just going to see banks sitting back, and dribbling these things out through an eyedropper over the course of time. That's number one.

Number two is, I think you ought to have an ongoing advisory group, particularly comprising, I mean, people from all potential investors but particularly small investors, as well.

Another suggestion that I would add is that the pools -- that you ought to arrange pools by geography, and perhaps, then, by type so that smaller investors might be encouraged to invest in these pools, as opposed to having -- being loans that are scattered across a wide geographic area.

And there also ought to be an approach to make sure that small investors are -- I think, that there's a guarantee -- that small investors will have a reasonable opportunity to make investments -- these small, individual investors.

And finally, I've got a question, and that is I -- I am -- I'm trying to exactly understand, when we talk about the FDIC issuing guaranteed debt, does this debt have to be resold? Is this simply going to the -- is the debt actually cash that then is going to the selling bank? And that's my question.

JIM WIGAND: We're still looking at that issue, it is one of the items we have out for comment as to whether or not that should be publicly issued, for example, bonds or if it would strictly be a note, which would be taken back by the selling bank as a formal consideration for the sale, and also what the terms of that note should be -- whether or not it would be a cash flow note, or a fixed pay, and you know, we're soliciting comment on that.

JOHN BOVENZI: And thank you for all of your other comments that you had before the question.

MARK WOLF: Well, thank you -- again, thank you for having the call.

Let me just follow-up with that question -- is there any thought of setting up some kind of advisory panel with respect to this for ongoing input and comment?

JOHN BOVENZI: It's certainly something that we'll take under consideration, so we do appreciate that comment, and we are certainly looking for ways to get the best advice possible, so we'll consider that.

MARK WOLF: Thank you.

OPERATOR: Our next question comes from Norbert Napke, please state your affiliation?

NORBERT NAPKE: Hello, I'm a -- I'm with the law firm of Kirkland and Ellis.

In your description of the potential investors, you left out private funds, such as private equity funds and hedge funds. Is that an oversight, or intentional?

JOHN BOVENZI: You're welcome to participate, as well. We are looking for a broad range of investors, and so please, do not feel left out by the opening comments, which were very general.

NORBERT NAPKE: Okay, thank you.

I have another question, and that is -- has to do with the regular -- I'm sorry, the executive compensation restrictions and other regulatory issues associated with dealing with the FDIC.

In the issue -- the materials that have been put out to date, it suggests that the executive comp and perhaps the other regulatory issues will not apply to passive investors, but it isn't clear how they might apply to the asset manager or the controlling partner.

I think that in particular, a lot of unregulated investors will be reluctant to participate if they believe that the executive compensation and kind of other regulatory overlays will apply to them. Do you plan -- how do you plan on addressing that issue?

JOHN THOMAS: Both the FDIC and Treasury are going to have to work through that, and a lot of the rules that people are concerned about -- indeed, all of the ones that are out there right now -- are Treasury rules, and so they're going to have to have an important part in deciding exactly what applies and how it applies.

I think, again, we don't have definitive answers, but before anybody is bidding on assets, that information will be out there, you'll know.

NORBERT NAPKE: Well, I just -- as a comment, I think that if those rules do, in fact, apply to active investors, I think you'll substantially reduce the number of bidders out there, which would have an adverse effect on the program.

JIM WIGAND: Thank you, we understand.

OPERATOR: Thank you.

Our next question comes from Adam Green, please state your affiliation.

ADAM GREEN: Thank you, I'm from Benalong Capital, we're a potential bidder.

I have two questions -- one, is it contemplated, or are you considering, how potential managers of the PPIPs will be compensated? Will any compensation for those asset managers have to come solely from the private investors' side? Or will it be paid from the proceeds of any liquidation in the actually PPIF?

And my second question has to do with the structure of any -- the debt that's to be provided by the FDIC? Since many of these assets are illiquid, is it contemplated that the interest in any loans provided or guarantees supporting loans will enable that interest to be capitalized until the portfolios begin to cash flow?

JIM WIGAND: With respect to your first question concerning the fees for the management of the assets, we would contemplate that, basically, those would be taken out of the waterfall for the entire fund, and that we would expect that the controlling investor, managing partner, however one wishes to express it, would basically submit what the terms of that would be in a bid package.

And additionally, we would anticipate having the -- certain restrictions built into that to reduce the possibility of gaming.

For the debt structure, as I indicated in an earlier comment, obviously each portfolio is going to have its own cash flow characteristics, and the debt structure is going to have to reflect those.

NORBERT NAPKE: Okay, thank you very much.

OPERATOR: David Dick, you may ask your question, please state your affiliation.

DAVID DICK: David Dick with Sostera Partners, potential investor.

There seem to be a lot of corollaries between the PPIF program and the structured sales that the FDIC uses to dispose of assets that have been taken from institutions taken into receivership. I'm just wondering if, structurally, you would anticipate that the funds will look a lot like the structured sale relationships between buyers of those assets and the FDIC in those structured sale transactions?

JIM WIGAND: Well, you are correct in that there are some fundamental concepts which are included in both programs, or fundamental with both programs. We are still having discussions with Treasury, with respect to the types of provisions which will be included in the deal docs which will put forth the servicing requirements, management requirements, reporting, et cetera, that will be required of a managing or controlling partner.

Certainly both the FDIC and RTC experience, going back to transactions, partnership transactions that the RTC entered into in the early to mid nineties, will be information that is used to develop those.

DAVID DICK: My second question, sort of a follow-up on that is the structured sales program for received institutions is seemingly less transparent than the other half of the program for disposing of assets, which is much more internet-based, and through interfaces with websites, and so forth.

Is there any thought of actually employing the PPIP for failed institutions, and the disposition of those assets?

Because this seems to be a structured sale kind of an approach, but with a very transparent approach to the disposition of those assets. I don't see any reason why you wouldn't be able to dispose of assets from received institutions any differently than you should be disposing of assets from institutions that haven't been received yet.

JIM WIGAND: Well, the PPIF program is actually just targeted towards open institutions, it's not targeted for failed banks or receiverships.

The programs do, like I say, have a lot of commonalities, at least with respect to the conceptual basics. As indicated earlier, we still have many issues -- detailed issues -- which are out for comment, and until such time that we - that the comment period is closed, and we have an opportunity to review those comments, it's a little difficult to say how -- how identical the programs will actually end up being at the end of the day.

DAVID DICK: Thank you.

And thank you for hosting the call.

OPERATOR: Our next question comes from Manny Martinez. Please state your affiliation.

MANNY MARTINEZ: Hi, my name is Manny Martinez from Green Builder Investments, and we are a potential bidder, but also have some interest in providing other services, or at least inquiring into this.

My question is, how far along are you in determining what kind of auction platform you will use with technology, and whether you have gone down the road of selecting -- or at least developing a short list of potential players who can provide an auction platform for this stuff, for the program?

And how can others, such as -- possibly -- our firm, get involved in that?

JIM WIGAND: Well, we are in the process of identifying the types of outside services that we will be obtaining for use in the program. Certainly the use of a valuation contractor, as John has already indicated, will be critical.

Due diligence contractors, financial advisors, providers of other services, perhaps auction platform -- depending on the comments we receive -- one of the issues that we solicited specific comment on actually was the auction process. So, depending on what those comments are, and an ultimate determination as to how that process would transact, it's a little premature to speculate as to exactly what type of auction services would be required under this program.

We do anticipate that for all of our services we will go through a competitive procurement process, and through that process, we will be soliciting a broad range of potential service providers.

ANDREW GRAY: And we do have more information on the website for potential contractors at www.fdic.gov/llp there is a section there devoted to those that would be interested in being potential contractors.

MANNY MARTINEZ: Yeah, I saw something like that.

Also, I think in there -- if I'm not mistaken -- there's something in there related to minority-owned firms and what qualifies -- are those consistent with the FDIC's previous definitions of what qualifies as a minority-owned company?

JIM WIGAND: Yes, those would be consistent.

MANNY MARTINEZ: Thank you.

OPERATOR: Thanks.

Our next question comes from Don Lamp, please state your affiliation.

DON LAMP: Yes, this is Don Lamp with the Womble, Carlyle law firm, I have a question and a comment.

My question has to do with the equity-raising process for the private equity investors, and what information will be made available regarding the assets being bid upon, when would that information be available and -- I guess this is a series of questions -- how much time will be built in for the equity-raising process, or will the government officials require cash on the barrelhead, all of the equity on account, so to speak, prior to the bidding process, or at some point in the bidding process? Is this the equity-raising mechanics?

JIM WIGAND: Yeah, we're still going through the process of making a determination as to what the investor qualifications will be to bid, and obviously that will be a key component of investor qualifications.

I would add that, with respect to, you know, timing, of course, those factors are going to be driven by the types of assets in the fund, as well as the size of the fund. So, one would expect, as far as the opportunity for investors to conduct due diligence or potentially to go through equity-raising initiatives, one could easily see how the size of the pool, as well as the type of assets involved, would be key determinants of that.

DON LAMP: Thank you. I have a comment, as well, which is, it seems to me that the residential mortgage hold-ons that may be sold are going to be subject to the previously announced Treasury home modification program, and it seems to me that consideration should be given to segregating HNP assets -- residential mortgage loan assets from other assets because the HNP-subject loans certainly will require a certain amount of skilled management and servicing resources to follow the Treasury and the GSE's requirements, and it also, I think, could affect pricing.

So, I don't know whether that's under consideration, but it seems to me to be worth consideration by the agency, that special attention be given to the HNP-subject assets so that -- if for no other reason -- that the borrowers can most efficiently benefit from the HNP program.

JIM WIGAND: Thank you for your comment.

OPERATOR: Leonard Lister, you may ask your question, please state your affiliation.

LEONARD LISTER: I'm here, Leonard Lister, I'm chairman of the Ward and Lister Capital Management.

And I've noticed that there's an excellent example in the white paper of the Legacy Loan Program of a capital structure amongst the FDIC, Treasury and private investor group for a hypothetical $100 mortgage loan, purchased at $84.

I was trying to simulate what the structure would like throughout the life of the loan, and it struck me that during the course of the year, there would be cash flow generated from the mortgage pool consisting of interest amortization repayments. Unfortunately, there will be certain default incidents within the pool.

It would be very useful if you could carry that example forward one year, to describe how the cash flow generated from the mortgage pool is distributed amongst the participants in the partnership. That is, how is the cash flow distributed to the Treasury partner, the FDIC as far as loan repayment, and the private investor group?

More specifically, how will annual default incidents be accounted for as a debit to cash flow for any distribution of the proceeds as received by the private investors?

JIM WIGAND: Well, I think your question was both a comment and a question. We certainly will take your initial comment with respect to extrapolating that cash flow over a period of time, and maybe come up with an example that we could put out with that.

But, of course, that type of analysis is going to be very much pool dependent, and depending on the assets that are included in the pool, whether or not it's performing single-family pool, maybe pick a pay loans, initially, or whether or not it's defaulted ADC loans, obviously, they're going to have very different cash-flow characteristics.

And we would anticipate that as part of the evaluation process, our independent evaluation contractor will be developing cash flow pro formas, perhaps in an analogous fashion to what RTC did in this derived investment value analysis, and prospective bidders would have an opportunity to review those cash-flow analyses as part of the due diligence process.

With respect to the financing, or structure of that, you know, it's a waterfall -- it ends up being a waterfall issue. And as we indicated earlier, we still are making determinations as to how that waterfall is distributed, and once again, with respect to specifically, prioritizations, whether or not the note is going to have to -- basically a turbo feature and will be priority payment and the distribution of that cash flow has yet to be determined.

LEONARD LISTER: I see.

So, it would be possible that if default incidents is greater than expected, that no cash flow would come to the private investor group, because some type of a debit would have to be made as far as a repayment -- a hypothetical repayment of the loan -- would be made to the FDIC?

JIM WIGAND: Perhaps, depending on what type of structure is ultimately adopted. If it's a cash-flow note, then that may not be a risk the investor would bear.

LEONARD LISTER: I see, thank you very much.

OPERATOR: Thank you.

Ann Goldman, you may ask your question, please state your affiliation.

Your line is open, please check your mute button.

[No response.]

OPERATOR: [Indiscernible], you may ask your question, please state your affiliation.

MALE SPEAKER: Westmore Partners, and we're a potential purchaser of loans. It's more of a comment from the standpoint -- on the FDIC's website, the pooling of the loans is going to be in billion dollar packages, and my comment and recommendation is to keep it consistent with what the First Financial and Debt-X platforms have been with smaller pools, which would include more investors and certainly the smaller investor groups' participation.

JIM WIGAND: Thank you for your comment.

MALE SPEAKER: Thank you.

OPERATOR: Norm Stelecki, you may ask your question, please state your affiliation.

NORM STELECKI: Stearns Bank.

My question is, can you give us some idea of the pool size?

JIM WIGAND: That is one of the issues that we have out for comment, you know, we do anticipate, though, that the pool size is going to have to be sufficient to make the transaction economically feasible.

NORM STELECKI: Well, can you give it a stab? Somebody just mentioned, or the last caller said, a billion dollars. Is that where -- I hadn't read that -- is that where you are?

JIM WIGAND: No, what we anticipate is that once we receive comments, we will be making determinations of pool size. However, I think as everyone on the call could easily envision, that would also be a factor of the types of loans which are constituting the pool.

Certain loans are easier to do diligence, certain loans have larger averages balances than others, certainly, and I think these will all be factors in determining what, basically, constitutes a critical mass to make this type of structure economically efficient.

NORM STELECKI: Okay, thank you.

The other comment I have is, somebody earlier commented on the feasibility of some banks selling these loans at the discounted prices. So, how much stock has been -- or research has been done on that?

DAN FRYE:

I think that's an economic decision that every bank is going to make that goes through the application process. They'll look at their -- they'll work with their primary federal regulator, they'll determine assets, we will look at it on a post-sale viability, see what the prospects of the firm are, going forward.

Many banks may look at this as an opportunity to move some assets off the books, which would allow new capital to come into the organization, so for every bank it's going to be a little bit different, and we know that certain asset classes are going to be more depressed than others, but every bank has to sit back and look at that and make that economic decision for themselves.

NORM STELECKI: Okay, thank you.

ANDREW GRAY: Operator, we've reached 1:00, I guess we'll bring it to a close here, now.

We want to thank everyone for their participation on the call. A reminder that the comment period does end tomorrow, so I would encourage those that have not commented to go ahead and do so. Again, the web address is www.fdic.gov/llp so would thank you for submitting those comments.

Again, a reminder for any press that was on the call, this call is not for attribution, so it should not be used for quotes or otherwise. If you have any questions, you can call the FDIC Office of Public Affairs.

And with that, we'll bring the call to a close.

Thank you very much.

(End of audio.)