The creation of another high-profile investment group intent on buying failed banks is leading some to wonder if there are too many sharks circling the Federal Deposit Insurance Corp.

William Isaac, a former FDIC chairman, is leading a group that includes former U.S. Bancorp Vice Chairman David Moffett and Ray Christman, the former head of the Federal Home Loan Bank of Atlanta.

Their firm, BSE Management LLC, said that creating a $2 billion fund would allow it "to be highly selective" buying failed banks, according to an offering sheet obtained by American Banker.

BSE is the latest in a wave of dream teams looking to time the recovery, which raises concerns about the economic viability of future FDIC-assisted deals.

"These types of transactions are attracting a lot of attention now, and it remains to be seen whether investors will do well with them all," said John Kanas, the former chairman and chief executive of North Fork Bancorp, who joined the trend last year with WL Ross & Co., which completed a private-equity deal for BankUnited Corp. in Florida.

An emerging concern is that as more bidders chase failures, the FDIC gains a greater advantage when it comes to dictating pricing and terms, making future takeovers less attractive from a financial perspective.

Observers compared OneWest Bank's purchase of IndyMac Bank in July 2008, which had a 23% discount to face value, with the group's December purchase of First Federal Bank of California, which came at a 6.1% premium.

H. Rodgin Cohen, a partner and the chairman at Sullivan & Cromwell, noted that the various investor groups that have formed are targeting different geographic areas, but he agreed there will be "scarcity value" if multiple groups converge on a market.

"At some point there is no question that you will get too many" suitors, he said, "but I'm not sure we're at that overload point yet."

BSE's focus on the Southeast makes sense given the background of its principals, including Christman and John Ryan, a veteran regulator in Atlanta with both the Office of Thrift Supervision and the Federal Reserve. Bloomberg News first reported the group's formation on Thursday. Isaac declined to comment for this story.

The group has also recruited numerous bankers with experience in the Southeast, including George Koehn, a retired CEO of SunTrust Banks Inc.'s Florida bank in 2005 who would run the bank. Robert Helms, who at one point oversaw Wachovia Corp.'s Florida bank, and Cecil Sewell, a former chairman of RBC Centura Banks Inc., would serve on the board. BSE plans to sell the bank it creates within five to seven years.

Georgia and Florida are full of struggling banks.

In Georgia, 33 banks have failed over the last two years, and the state has anywhere from 70 to 100 banks on the FDIC's list of problem banks. Nineteen banks failed in Florida over the some period, and Foresight Analytics LLC, a market research firm in Oakland, Calif., estimates the state has another 83 troubled banks.

Aspiring bank investors who are stymied in their efforts to gain attractive deals in targeted markets could also face pressure to redeploy funds elsewhere, perhaps preempting FDIC involvement by jumping in to rescue and recapitalize struggling banks.

"If they wait for failure there is heavy competition," said Ken Thomas, an independent consultant and economist based in Miami. "There are people out there trying to make deals with people before the FDIC steps in. They are trying to find distressed banks that they think they can deal with."

That could lead to bad decisions, said a private-equity investor who asked not to be named. "When all this capital starts to build up, people can do some dumb things," the investor said. Though Cohen acknowledged there may be temptation for some groups to force a deal, he said "that is one of the reasons for having the right people in charge of these firms."

In the last 18 months, several ventures similar to BSE and Kanas' venture have sprouted up.

In December the New York private-equity firm Crestview Partners led a $550 million equity raise in North American Financial Holdings Inc., a group that focuses on FDIC-assisted transactions and is led by former Bank of America Corp. Vice Chairman Gene Taylor.

In January the private-equity firm Bond Street Holdings LLC, which is headed by former North Fork Chief Financial Officer Daniel Healy, bought the $350 million-asset Premier America Bank in Miami from the FDIC. The firm struck again in January when it picked up the $875 million-asset Florida Community Bank.

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