The FDIC might fail, requiring a federal bailout, warned Andrew W. Lo, dragged down by the failure of regional banks with substantial commercial mortgage debt.
Mr. Lo, founder and chief investment strategist of AlphaSimplex Group and a finance professor at the Massachusetts Institute of Technology, said that a failure to restructure debt on Stuyvesant Town-Peter Cooper Village — the vast New York apartment complex — could cause New York banks holding its debt to collapse. The value of the property reportedly has dropped more than $3.2 billion since it was acquired in 2006 for $5.4 billion by Tishman Speyer Properties and partners.
Mr. Lo made his comments at a press briefing hosted by Natixis Global Asset Management, AlphaSimplex’s parent company.
The Federal Deposit Insurance Corp. has proposed that banks prepay their assessments to the FDIC for the next three years, generating some $45 billion in revenue for the cash-strapped insurance fund.