ARM Coalition Gears Up to Help in Second Round of TARP

“Companies [to buy the bad assets] are waiting for this to happen,” Fromm said. But in order for there to be uniformity in pricing, there needs to be a single overseer of the assets, like the RTC was for the thrift industry, according to Fromm.

A news report early Wednesday from Bloomberg News indicated that the Federal Deposit Insurance Corporation (FDIC) would manage the bad bank.

Fromm recommends marking to market the value of the assets to be disposed, which would be sold in different pools to public-private partnerships.

By using such partnerships, there’s incentive for buyers and benefit for the public if the assets are sold for more than their current value (after being marked to market), Fromm said, adding that the RTC was very successful in disposing of assets at gains.

Purchase of the failed assets in such a manner is very similar to the method used by creditors to retire bad debt, added Rozanne Andersen, ACA International executive vice president and general counsel.

“Leaving the debt on the books of the banks does not send the right message to the public,” Andersen said. “Buying the assets, shows that the government is addressing the issues and addressing them properly and will move to collect the debt in a responsible manner.

The collection industry has a definite role to play, Andersen added. “We can assist in the evaluation of the bad debt, looking at the likelihood and expected percentage of recovery. It will take an incredible amount of human resources to collect the debt.”

The collection industry has the human resources as well as the sophisticated technology to help the government, and by extension taxpayers, maximize their return on these failed assets, Andersen said.