Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.
Sheila C. Bair, head of the F.D.I.C., would prefer not to tap a line of credit from the Treasury.
Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.
The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.
I wonder why?
Bankers worry that a special assessment of $5 billion to $10 billion over the next six months would crimp their profits and could push a handful of banks into deeper financial trouble or even receivership.
Ah!
The lending banks would receive bonds from the government at an interest rate that would be set by the Treasury secretary and ultimately would be paid by the rest of the industry. The bonds would be listed as an asset on the books of the banks.
So, rather than “crimp their profits,” they will earn interest. Cripes! Time to switch careers and become a banker. A bad one so I can get all of you to pay me for being bad.
Banks pay a regular special assessment to the FDIC as a matter of course. It is how the FDIC has always been funded. This is simply an additional assessment for a unique circumstance – therefore the bonds.
But, if y’all want to get your bowels in an uproar over it, enjoy.
ECHO TANGO FOXTROT!
Eric,
LOL!
Absolute madness. The politicians now and then have no balls to manage anything correctly. Now the big banks propped up by the government will profit off the government. Madness!
“Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help,” said Camden R. Fine, president of the Independent Community Bankers. “She’d do just about anything before going there.”
Lovely. Fire these people. They can’t manage their egos in order to do their job.
I guess this is a bit like a reversed S & L crisis. In that one little, mostly, banks in Texas and the Southwest, mostly, either gambled away or outright stole a huge amount of money. The FDIC stepped in and paid off using coin from the taxpayer and bigger banks.
Nothing like today where it is the big banks that gambled or stole and the little banks and the taxpayer who pick up the pieces.
Whew! I’m glad we fixed that one before it became a big problem…
Banks that make loans off of depositors money and banks that make derivatives off of their own money need to be separate institutions!
The FDIC is now, again, in the position of guaranteeing the most incomprehensible financial turdlike instruments in existence.
Happy days are here again
I believe Jon Stewart’s Carousel of Jackassery graphic would be appropriate here.
The FDIC already raised its insurance premiums in the 1Q 2009. This would be a second increase in less than one year.
Plus, the FDIC already reports to the Treasury Department. Since the FDIC is semi autonomous, it sets its own rates. Which it has done since the reformation legislation done under Bush in 2006. No wonder she doesn’t want to approach Geitner. That would mean they have been underfunded by the conservative elements.
Bair said back in Sept 2008 the FDIC had plenty of money in the reserve.
Bair repeated her view that the Deposit Insurance Fund, which stood at $45 billion at the end of June, has sufficient funds to withstand an expected increase in bank failures.
Oops. I guess she was mistaken.
Personally, I think the FDIC encourages risky behavior. If you know the government is going to bail you out, why be careful?
The FDIC is fine as long as the activities undertaken by deposit taking institutions are sharply curtailed.
Banking used to be a “boring” business with low risk and steady middling returns. That is what the FDIC was intended to protect. Depositors need not worry because if push came to shove other institutions with a similar structure would come to the rescue. That worked.
Now the big guys are rock stars of finance. They get cheap capital the little guys can’t, and take risks they obviously don’t fully understand.
I have no problem with oddball structures that slice and dice debt. There is an undeniable use for nearly every type of derivative, but only as a niche product.
If you want to run with the wolves you ought to be doing so on your own dollar. That goes for pension funds too.
Gordon Gecko: good. Mom and Pop bank: good. JPM investing in IRS: bad. CalPERS investing in MBS and CMBS: very bad indeed. Any of the above investing in commodities futures: cuff ’em, Dano.
#10, Loser,
Personally, I think the FDIC encourages risky behavior. If you know the government is going to bail you out, why be careful?
And personally I think you’re an idiot. The FDIC doesn’t encourage anything. You fail and they take you over. I see you missed class again this morning.
#12, I thought you weren’t allowed to talk to me until you answered my question?
Why would you allow 10 people to die to save your wife?
#11, The FDIC is fine as long as the activities undertaken by deposit taking institutions are sharply curtailed.
I agree.
If you are going to use my money bail them out, they should be curtailed.
Unfortunately, banking institutions know the government is there to bail them out so they take on these risks they shouldn’t.
Unintended consequences of the FDIC.
Holy F’k!
-They just showed the final hand!
They’re pulling an IMF style Argentina on America!
crap…and we’re in the process of devaluing the dollar right now in order to vaporize government & foreign debt.
(and whats left of the middle class’s
savings)
Didn’t they do a shock-therapy devaluation of peso in like 6
months? something like 60-70%?
and wipe out everyone who wasn’t on the inside loop? Then the banksters bought up everything for pennies on the dollar or some such?
I would not be surprised if this how obama plans to health care passed too. [in light of current, mounting friction]
-He’ll finish the job and pull the rug out from everyone that still has a house and savings, and get *everyone* on unemployment/unemployed until they beg for GovCorp health care
and 10 other GovCorp nipples.
The clowns in the white house are already “re-educating” the kids
to think government is “cool” via the
“national service” program he signed
into law. (see serve.gov)
His policies are causing much of the middle class to take pay cuts, or even entertain a new career for less pay.
Extensions in unemployment now require that you also look for or take jobs that are 80% of your prior job. (a 20% pay cut)
(Here in nyc they slipped in a stealth 5 week extension a few weeks ago for those at the end of the extension line, -with no notification. While a godsend, this goes to helping manipulate job numbers.
It would not surprise me if they soon ask the unemployed to work for that check by taking a position in a government job as a clerk filing the mountains of paperwork or data that will come if the health care or cap&trade fiascos are passed.
-In which case the “cradle to the grave” mantra of yor will have been full filled with glee.
From what i can remember of the aftermath, this now looks like we are being played into an Argentina style fiasco for sure with this announcement, 100%.
They just need a nice crisis to kick it into high gear. the swine flu scam would be perfect for the health care angle.
We still have huge Mortgage resets through 2011 to help kill the financial sector all over again..
Here in NYC the past two weeks we’ve had a smattering pretty week “terror threats” so we’re being warmed up for that angle as well.
Gotta hand it to obama, he’s delivering on the “transparency”
of their actions.
However, it truly sucks.
The majority of this country now only knows how to operate a microwave oven, remote control and a web-enabled device..it ain’t gonna
be pretty.
Soon as they push the suckers rally in the DOW to 10,000+ and get the rest
of the amateurs to throw in, i imagine the festivities will begin..
They say those who do not learn
from history repeat it. well, sadly, i do not know any other country that sucks worse at history than America.
The Argentina scam worked beautifully.
I can’t see any reason not to use it again. -especially on a country as asleep [and drugged up on meds] as America.
::sigh::
-s
I want to ask..
Do you think the BANKS will monitor the GOV, better then the GOV. monitored the BANKS??
Get money from a bank to BUY a house..do you THINK you can go spend it, OTHER PLACES??
I keep hearing people go on and on about hyperinflation, but I don’t see any yet. In fact, so far the problem has been deflation, particularly in real estate. This is not to say it won’t happen — it’s hard to say it won’t given the debt we’re piling up, unless we raise some taxes fairly soon — but people keep talking as if it started last October or something.
The ironic thing about this story is that if it hadn’t been for TARP, the FDIC would have completely exhausted its funds by about Valentine’s Day, if not sooner.