Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
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.
taken directly from karl denninger, since it was so well stated:
I don't quite believe that. I heard on the news they took millions/billions of funds and 'set aside' for future collapses....so they removed those funds from their 'bottom line' causing a deficit to show.
Don't know how true that is but wouldn't surprise me.
One thing I've learned is nothing is as it seems in government.
I don't quite believe that. I heard on the news they took millions/billions of funds and 'set aside' for future collapses....so they removed those funds from their 'bottom line' causing a deficit to show.
Ding ding ding.
It's an accounting thing. Insurance companies and funds like the FDIC are required to put aside as a liability whatever they forecast to pay out within the next year. The FDIC set aside $21.7 billion in the third quarter for failures they expect to occur by 9/30/2010. However, FDIC is not allowed to include on the balance sheet income from assessments that it will collect in the next year, nor investment income (mostly Treasury bills). Including short-term liabilities (ie, due within next year) and excluding all future income is required by the accounting principle of conservatism. We don't like to paint rosy scenarios.
Also, to give the Deposit Insurance Fund (DIF) more liquidity, the FDIC is requiring banks to prepay the next few years' assessments. This won't affect the fund balance, but it will provide more cash to handle bank failures, if needed.
I won't defend all of FDIC's actions. I think they have made some wrong moves. But, they were statutorally limited in how high they could let the DIF grow before the crisis. I think Congress should revisit the limit of 1.5% of insured deposits once this settles down.
Congress, in one of their bills, made $500 billion available to them from the Treasury.
If they need money..just ask Tim. If Tim doesn't have it then ask Ben to print some up.
Congress, in one of their bills, made $500 billion available to them from the Treasury.
If they need money..just ask Tim. If Tim doesn't have it then ask Ben to print some up.
Don't worry... Obama made a brilliant plan by setting up this "stress" test and everything is okay cause most of the banks passed... so don't worry, its not like he is going to raise your taxes for his failed policies...
Is this suppose to be a surprise? Of course not. The FDIC will need to get money from the treasury or other sources. No big deal.
How is that no big deal. printing our money into oblivion is a big deal.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
