In the brokering the deal that ended up selling Wachovia to Citibank the FDIC essentially did what Congress just voted down.
As part of the Wachovia /Citibank deal the FDIC agreed to to assume the loss on $312 billion of loans in excess of $42 billion. Essentially what the FDIC did was insure the portfolio of loans that Citibank was acquiring from Wachovia for a single premium of $12 billion in Citibank Preferred and some warrants.
Wasn't this exactly what the Republicans wanted the Treasury bailout to look like and that in fact was a component of the bill that was voted down. So essentially the FDIC went ahead and did a deal that the Congress expressly turned down!
I am not a constitutional lawyer and would love to have one comment but didn't the FDIC just usurp the power of the purse from Congress. If they can do this deal why not many more like it essentially making the bail out bill moot?
I still wonder why the FDIC decided to go this route and hand the shareholders of Wachovia $2.1 billion gift. As in the case of Bear Sterns absent the willingness of the FDIC to assume the risk in excess of $42billion there is no way that Citibank would have paid a $1 per share for Wachovia. As an aside looking at the Wachovia pricing one realizes what a really terrible deal the Fed struck with regard to Bear Sterns. They only got a 3% hair cut and no payment from JPMorgan- are these the folks we really want to trust with our money?