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FDIC Folds to Banks, Again
The FDIC announced this morning that they will not be going through with
the scheduled increase for deposit insurance for America’s banks. The
reason for the roll back in premiums comes as a result of a downward
revision of the losses the FDIC faces:
The
FDIC has updated its income, loss and reserve ratio estimates and has
concluded that expected losses for the period 2010 through 2014 are
lower than were projected in June 2010. The FDIC now projects that losses during this period will be $52 billion, rather than $60 billion as projected in June.
What has changed since the June analysis that showed a $60b loss versus
the mid October guess of only $52b? How about the foreclosure fraud
issue? As of today we have no clue what the impacts will be of this
mess. It could be very significant. The stock market has been beating up
the stocks of the banks since this story has been on the front page.
While the actual impact may be unknown, what is now a certainty is that
the banks will have to take additional losses due to the foreclosure
disaster. Some of those losses will take some banks into the hands of
the FDIC.
There is no way that loss expectations at the FDIC could be reduced in
this environment. So what could be the motive for the FDIC to reduce
fees at this time? Simple, they wanted to help out their pals, the banks
with some additional earnings:
The FDIC has concluded that given the continuing stresses on the earnings of
insured depository institutions and the additional time afforded to
reach the reserve ratio required by Dodd-Frank, that it will forego the
uniform 3 basis point increase in initial assessment rates scheduled to
take effect on January 1, 2011.
Is this a big deal? Not really. The FDIC insures $7.6 Trillion of
deposits. Three basis points comes to just $2.3b a year. But these
savings will be concentrated on the big banks. So it means a few hundred
million to BAC, C, JPM, WFC and the other bad boys. These big slugs are
doing just fine. They are earning billion thanks to ZIRP. They do not
need the extra $300mm the FDIC just gave them.
We are not even close to a point where our financial institutions are
truly sound. We have massive losses in front of us from the RE problem.
Should we hit an economic wall again (an increasingly likely prospect)
the FDIC will be faced with big losses. The taxpayers will foot any
shortfall. This has happened in the past with both the FDIC and their
sister the National Credit Union Administration. ($30b bailout two
months ago!)
We have not learned the lessons from 2008, that or we have forgotten
them. I am disappointed in Sheila Bair. She folded to the big banks on
this one.
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They know the banks don't have the money for those increases.
agree if you're saying "too big to fail is why we bailed out the banks then and now" so they "now have more taxpayer bucks." whatever happend to that SEC investigation into Goldman? Oh, hey look! They were up in price today! And what is a Goldman speciality? Shorting the banks they're selling the world's most worthless MBS product too! And calling it a "professional courtesy" no less! To our face before Congress! Amazing. Is it "their job"? Blow up the banks the government must bail out? If testimony before a Congressionally madated investigatory body with subpoena powers is any hint it would appear it was both Goldman AND Congress' want. Again "who is paying for anything right now"? Ben Bernanke? How do they say it in Atlanta? "Fo real?"
No worries, Dudd-Fwank covers all.
/end sarc
A) The banks pass the cost along to the people anyway.
B) If the mortgages are put back the big banks are all done for.
C) Maybe FDIC losses are smaller because Dodd-Frank resolution for the larger banks won't effect the FDIC?
Aall is well!
aall is well!
all is well!!!!zzzzzzzzzzzzzzz.........
i expected nothing less of the whore of the fdic....how many banks have folded this year?
There seems to be real panic out of the Fed, FDIC etal right now. Even to the casual observer such as myself their fear of a catastrophe is very palatable.
They will do anything to "save" the money center banks. While their motivation may be unsavory, it also could be that they have info or can see that the last 2+ years of pumping trillions into the system has not really improved the situation. Bennie and Shelia know that the "crash" will come and they are powerless to prevent it.
They really have no good options and they know it.
sschu
They may need to rethink that once the examiner report becomes public in the WAMU bk case November 1st. JPM plans to put back all losses onto the FDIC from that one.
She's still smartin' an bruised from da pimp hand of you know who. He told da bitch to keep quiet 'til dem mid terms be over and done.
Wouldn't it be nice if somebody would, just once, make a decision in the public's name without regard to the stock market?
Sheila needs to be gone. I expect another capital call (banks asked to pre-pay DI premiums in advance) before long..............Ouch!
It would be better to say "We dont need the FDIC" and move on.
This is what they fear... effectively, the "market" answer for increased insurance premiums with the knowledge that the insurer is insolvent is to do away with the cost of insurance. In this case, the first mover is going to get clobbered, presuming existing capital reserve ratios and recent banking activities. As a result, full reserve/high % reserve banking is going to begin the new era... it will be born from the market and will not need a governmental backstop... it will be leaner and meaner than its counterparts and will weather the storm. In turn, it will provide less profits, but it will survive. Mark my words, if the FDIC doesn't outright fail, it will eventually be shunned by the system because it cannot pay for the required premiums and/or does not believe the insurance will pay.
The 3 year pull ahead in premiums nearly finished off a lot of smaller/regional banks... the backlash was fairly... universal. This is called capitulation/desperation by the FDIC. It's in a vice... if it requires banks to pay the premiums necessary to actually insure anything, then it will cause the banks to fail...
Did you see her recent C-SPAN Newmakers interview?
From Sunday, October 17
Enjoy ...
I had a dream that FDIC would be dissolved, but woke up to a new and improved fascism.
hilarious.
Today marks an important turning point for global markets and the USD strength I warned about has arrived.
http://stockmarket618.wordpress.com
There is one level to beat yet and that is SPX 1142. That level corresponds to the 23.6% short-term Fibonacci retracement, as drawn by the low of late June 2010 and the high of last week (assuming it was the high...). The Fibolevels are also valid in longer and shorter time-frames as well.
There is a blatant gap to beat on the SPX, as there still is on the Aussie-greenback cross, and that is the 1112 area (0.9279 area for AUDUSD...). Initially, the drop will be swift, as it has been these last few days, but I would expect the selling to become more orderly as the next week to ten trading days unfolds. That way, the SPX "glides" into 1142, which will give the professional pump-and-dumpers another reason to bark through the idiot box and try to lure the home-gamers back to holding the bag. The critical breakdown will occur at 1112 level as the Center of Gravity drops slowly away from support and big money leaves a sucking vacuum under the market. (Call it Destination 444...)
It seems that POMO is a bitter drug. A necessary drug; who am I to decide? The efficacy of the Fed injections, however, is wearing off and wearing thin. With the public gatching wind of stuff like the artificial rise in the SPX 2/2 POMO, there is reason to believe that They would fear us going all Champs-Elysees on their ass.
All they need do is fear and that changes the entire game-plan. In the coming weeks, watch what they do and not what they say especially carefully.
When trading 4X, the Euro-greenback cross is going to exactly mirror the movement in the SPX. Follow it all the way down to at least 1142, then watch for the chop. Stick a robot on it. :D
Olexsandra
so this is it? You've picked the bottom? Can we hold you to this? And, if you are wrong about this being a bottom, will you stop your shameless self-promotion?
"She folded to the big banks on this one."
I agree, and the DIF balance is still negative so the FDIC does need the money. Scam government.
"She folded to the big banks on this one."
Oh yeah, Bruce, she was tough with the banks on all other issues but she folded on this one.
I love your stuff but get real here.
That did stand out! He simply misspoke, I'm sure.
And pray what might those other issues be that she has been tough on ?
He is being facetious, or at least I read it that way.
Are you trying to say that -$15,247,000,000 isn't adequate enough to insure $5,438,866,000,000 in deposits?
Surely, Sheila's credit is good?
http://www2.fdic.gov/qbp/2010jun/fund.html
:P Is that what I said?
How does that work, anyway?
"Hi. I had $100,000 in your bank and you went bust, so the FDIC stepped in. I want my money now."
"Ok. You owe us another $5."
"If I pay you $5, you will give me $100,000?"
"No. We have a negative insurance policy, so you pay us for fucking you."