In Table 19–5 , a failed bank in part (a) has only $80 million in good assets to meet the $50 million in deposit claims of insured depositors and the $50 million in claims of the uninsured depositors. That is, it has $20 million negative net worth. Under an IDT, in part (b), the FDIC would transfer the $80 million in assets to an acquiring bank along with the full $50 million in small insured deposits, but only $30 million of the $50 million in uninsured deposits. Notice that the uninsured depositors get protection against losses only up to the difference between the estimated value of the failed bank’s assets and its insured deposits. In effect, the uninsured depositors are subject to a haircut to their original deposit claims of $20 million (or, as a percentage, 40 percent of the value of their deposit claims on the failed bank). After the IDT, the uninsured depositors own $30 million in deposits in the acquiring bank and $20 million in receivership claims on the bad assets of the failed bank. Only if the FDIC as a receiver can recover some value from the $20 million in bad assets will the loss to the uninsured be less than $20 million.
To summarize the losses of the three parties under the IDT: