But I would have a question even if I was one of the insolvent banks. At what point does Congress and The One decide that any profits earned become obscene and need to be taxed at a 90% rate, since, you know, it was the people's money that made it possible?

Does any of this remind anyone else of The Producers?

I am not following the accounting in your example. The way I see it, the bank had $10,000 in assets on their books. They sell them for $8400, taking a loss of $1600.

In the example, the default rate is 50% so actually the value is $5,000.

The other point I don't follow is your assessment that the FDIC will be left picking up the cost of the 50% of worthless assets. My understanding is that the government, via the FED and FDIC, is providing a loan, not guaranteeing against a loss.

Its called a non-recourse loan. That is if the investment pays off I pay back the FED/FDIC. If it goes bust, I don't pay them back.

The only way I see the government getting stuck is if the private equity partner defaulted on their loans.

Since it is a non-recourse loan there is no downside to defaulting. In fact, it isn't really even defaulting.

The other point I don't follow is your assessment that the FDIC will be left picking up the cost of the 50% of worthless assets. My understanding is that the government, via the FED and FDIC, is providing a loan, not guaranteeing against a loss. The only way I see the government getting stuck is if the private equity partner defaulted on their loans.