The FDIC is the organization that takes over banks when they fail. They then sell the failed bank to another healthy bank and back the debt with tax payer money.
In order to remove the toxic debt they pick up during these acquisitions they bundle them and sell them into the market.
This week they sold a mortgage package for $1.8 billion. The original value of the real estate debt was $3.6 billion.
They sold the debt to hedge funds, banks, pension, and insurance funds; the big boys.
Not only was the debt sold at 50% off, but the buyers got a guarantee on the monthly payments of the debt. The FDIC released this with the sale:
"The timely payment of principal and interest due on the notes are guaranteed by the FDIC, and that guaranty is backed by the full faith and credit of the United States."
Not only must the taxpayer pick up the $1.8 billion loss at the sale, but they now stand behind the loans and every interest payment moving forward.
It is astoudingly frightening to think about what would happen if people understood what was happening to them right now.