Another Bank Bailout math problem

Lets say I have a bank.
And i have 1 billion dollars of condos in a flood plain on my books.
My buddy Bob leaves my bank, sets up a LLC, and bids up the value of my toxic realestate to 10 billion dollars.

I, as the bank, just made 9 billion dollars.
Bob just put up 800m for the property.
Bob goes chapter 11 - he's out 800m - sucks to be him... except for the offshore account where i slip him his share of the profits.

Who pays for this? why the taxpayer does...

This is a Ponzi scheme to put Bernie Madoff to shame