To the extent necessary, the FDIC will then use available parent holding company assets to recapitalize the firm’s critical operating subsidiaries. Equity claims of the failed parent company’s shareholders will effectively be wiped out, and claims of its unsecured debtholders will be written down as necessary to reflect any losses or other resolution costs in the receivership.
Although some retrenchment in lending standards was necessary and appropriate given the lax standards that prevailed before the crisis, current lending practices appear to be limiting or preventing lending even to creditworthy households.