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Getbig Main Boards => Politics and Political Issues Board => Topic started by: Soul Crusher on November 24, 2009, 08:50:44 AM
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The FDIC Is Broke
The Market Ticker ^ | 11/24/09 | Karl Denninger
Posted on Tuesday, November 24, 2009 11:41:11 AM by FromLori
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Yes, really.
Off the wire this morning:
FDIC Deposit fund had negative $8.2B balance in Q3
That's broke. Bankrupt. Kaput. Gone. Poof. Dead. Rotting. A corpse.
Yes, yes, I know, Treasury has their back. But let's not forget - The FDIC does not have a legal "full faith and credit" guarantee from the US Federal Government and Treasury.
It has a "sense of Congress" resolution, but not a formal, legally-binding guarantee.
I am not, by the way, predicting an actual FDIC failure to pay. Should such an event happen it would be tantamount to a declaration of revolutionary war (by the government about to be deposed!) as if there is one thing that would cause Granny to reach for her shotgun, it would be getting screwed out of her life savings after Sheila Bair and everyone else in our government has trotted out how their money is "fully safe" and that "nobody has ever lost a penny of insured deposits and never will" for more than 20 years, including lots of pronouncements of exactly that mantra over the last year.
Nonetheless this outlines the underlying problem the FDIC has - it has willfully and intentionally ignored the fact that banks have mismarked their "assets" to overstate their values, it has refused to demand that accounting be done on a strict "mark to market" basis by bank examiners, and indeed, it has backed the "extend and pretend" commercial real estate "rollover" provisions of recent months, all of which is manifestly unsound, intentionally misleading, a consequence of willful refusal to enforce 12 USC Ch 16 Sec 1831o ("Prompt Corrective Action"), and has led to enormous losses being absorbed by the Deposit Insurance Fund that should have never happened.
The result?
THE FDIC IS BROKE.
Let's put this in common-man terms:
YOUR SO-CALLED "DEPOSIT INSURANCE" AND THE SEVERAL TRILLION IN CITIZEN BANK DEPOSITS ARE BACKED BY THE SAME AMOUNT OF CAPITAL THAT AIG HAD TO BACK THEIR CREDIT DEFAULT SWAPS: BUPKIS.
Congratulations Sheila - is that your resignation I see in your hand or is that your promotion from Obama - after all, we all know that in Government the more you screw up and screw the taxpayer, the better the job you're offered.
One final question: Is the only thing preventing panic and bank runs the sheer stupidity of The American People?
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Lets bash Palin some more. Focusing on the FDIC being broke is just . . . . . too boring I guess?
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U.S. Fund for Bank Deposit Insurance Falls Into the Red
Source: New York Times
The government-administered insurance fund that protects depositors fell $8.2 billion into the red for the first time since the fallout from the savings-and-loan crisis of the early 1990s as the pace of bank failures accelerated in the third quarter.
Bank customers, however, should remain confident that their deposits would be protected since the bulk of that negative balance reflects money the agency has set aside to cover future bank failures.
Federal Insurance Deposit Corporation officials warned in October that the deposit insurance fund had been depleted, but Tuesday’s third-quarter report card on the banking industry marked the first time that hard numbers had been released. Even amid early signs that the economy is recovering, the report suggested that the country’s 8,100 lenders remain in fragile condition.
In its state of the industry report, the F.D.I.C. reported that banks posted a $2.8 billion gain in the third quarter, after a $3.7 billion loss in the previous period. Meanwhile, the number of “problem banks” that run the biggest risk of collapse increased to 552, from 416 in the second quarter. Bad loans of virtually every stripe — credit cards, mortgages, small business and commercial real estate — continue to grow, albeit at a slower pace.
“The credit adversity we have been discussing for some time remains with us, and we expect it will be a couple of more quarters before we see a meaningful improvement in that trend,” Sheila C. Bair, the F.D.I.C. chairman, said. “I am optimistic that if we address these problems head on, we will see clear signs of improvement in bank earnings and lending in 2010.
Read more: http://www.nytimes.com/2009/11/25/business/economy/25fd...
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lol
What a joke.
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The FDIC isn't a profit center. With the 123 banks or so that failed since last fall.(this info was as of nov 15) I'm surprised that they haven't needed a capital infusion even sooner..