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FDIC May Seek Bailout From Banks
The FDIC just may have to borrow billions to help replenish a dwindling fund that insures regular deposit accounts.
The very fund that insures depositors when banks fail, just may have to borrow before it fails, according to anonymous government officials. Anonymous because the plans are "still evolving" according to the Associated Press.
Regulators are also considering a special emergency fee on all member banks, charging regular fees early or possibly tapping into a $100 Billion line of credit with the U.S. Treasury.
(Oh, just tap into the Treasury, everyone else has lately, right?)
The FDIC fund that's there to save your ass when things go bad, is at it's lowest point since 1992- which at the time, was the height of the savings-and-loan crisis.
The FDIC is reportedly trying to avoid charging any additional fees to banks during these "trying times."
The FDIC estimates that bank failures will cost the fund around $70 Billion through the next four years, 2013. Some 94 banks have failed thus far this year and hundreds more are expected to fail due to worsening loans for CRE, among other things.
The FDIC fund has slipped to .22% of insured deposits, a fraction of the 1.15% mandate by Congress.
FDIC Chairman Sheila Bair- "we don't want to stress the industry too much at this time, when they're still in the process of recovery..."
How nice of them.
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Liesman just reported that this is not likely to happen.
The fact that it was even considered indicates how far off the reservation and into the deep end we, as an economy and a nation, are.
One of four scenarios:
First, the big banks loan them the money and the SEC comes out of the closet and reveals itself as a banking shill.
Second, no money comes. The FDIC already raised rates on all banks for deposits into the fund... the settlement was a far cry from what the FDIC wanted at the time... basically, banks said "we're broke and literally cannot give you any additional money, even considering your regulatory oversight and accounting shenanigans... we're fucking broke." (they weren't lying either).
Third, the FDIC goes ahead and raises its required rates anyway and forces collapse of all banks not TBTF. These smaller/regional banks are sold for pennies on the dollar on up the line. The worst assets go to institutions already set to fail and/or packaged to wild west speculators, the best go to the "winners." It sounds crazy for the FDIC to basically force a collapse of the system it doesn't have enough money to backstop, but it's a viable alternative to keeping the TBTF up and they'll do anything to keep their heads above water... including pulling others under.
Last, the FDIC gets a bailout by fednasty.
All of these are viable alternatives... but at this point, the FDIC WILL get funding... the only question is where.
I should say, however, that LIESman is usually wrong, and anything further the Fed & FDIC can do to artificially prop bank earnings will be done immediately.
The fact that the Fed has given away over $800 Billion in excess reserves directly to banks, while the FDIC still needs money to bail out banks, tells us a lot about which banks got the money, and why.
+1
It blatantly shows who is in control of the money.
If administered properly, the FDIC supposed to sieze and close banks before any losses are recorded.
Also, If I'm reading this properly, the FDIC now has 1 dollar in reserves for ever 4,500 dollars lent out by the banks.
scary.
sorry, if you actually go by the more likely leverage numbers for large financial institutions, they have 1 dollar in reserve for every 13,700 that has been lent by banks.
Much scarier.
When the shit hits the fan and the FDIC finds itself broke and unable to make depositors whole it will be like the video below:
http://www.youtube.com/watch?v=ALn0GBkM_5c
Working/middle class on the left, banker class on the right. At some point, we just can't take this shit anymore.
We need to remember that things can get much worse for much longer than you think before it begins to come apart at the seams.
As long as the majority of the inmates (sorry, the US population) still has something to loose (meaning pensions, 401(k), IRA, Social Security) the inmates (oops... I mean US population) will not march in the streets demanding that this insanity immediately stop.
As long as the thieves can hold a gun to their own head and threaten to blow us to kingdom come, the average Joe blow will do nothing other than grip and groan and turn up the volume of American Idol.
With the start of the NFL football season and the fall TV programs coming out over the next few weeks, the restless beast will go back to sleep.
Good night, sleep tight, don't let the bed bugs bite.
They watch TVs in tents in Iraq.
Can you blame the dude?
Here he is the only brother,
and with one screen no less,
and he's got to sit across from whitey with three screens.
And the fucking white boy talks on the phone all day!
Man, will they ever stop oppressing our homeboy's?
Did ya notice how he flew across that table like Superman?
At some point, the brother just can't take the shit anymore!
I love it when things come full circle... this is the first example I have seen in this entire fiasco where we actually get to realistically figure out where the money is going to come from... like I do with my household budget. However, the FDIC borrowing money from the large banks is in reality borrowing the money the government gave the large banks through multiple schemes. The ponzi extravaganza continues...
Hi Minnie,
See my post at #76414's comment. Thought of leaving it here, but the concept was a little more complete there.
Hi MsCreant,
That was a great comment... just what I wanted to say... only really artistic and eloquent :-)
I would not have seen that without your comment. Thanks for the kind words.
I just got a new Philippe Grand Complication.
Currently 11:39 am
If "Philippe" means Patek Phillipe then I'm impressed. I have a Langematik Perpetual myself
Just when I thought my JPM pref. stock was a good safe yield stock. Jamie Dimon could end up doing the same thing JP Morgan (the individual, not the company) did years ago. Making the deal to try and save the system.
If so then we should just arb the yield spread b/w the pref. and treasuries.
Given the battle for oversight going on among the Fed, Treasury, and FDIC, you can only imagine the reason she would rather borrow from the banks...which is a HUGE conflict of interest. Since when to regulators borrow directly from the regulated? Will the DEA finance operations with money borrowed from gangs? Or the FDA with money borrowed from Pfizer and Merck?
Very revealing, the cat is outta the bag. The bankers own the tresury and the FDIC and the Federal Reserve banks own everything else. Borrow from drug dealers to build a prison? How about we borrow from the banks and build a prison for bankers?
"borrow from the banks and build a prison for bankers?"
A New Deal I can believe in. Can't outsource these jobs. No immigrant labor because Americans will be lined up by the 100,000s to apply for building and running the banker prisons. Maybe an electric chair (Energy Star of course, with tax rebates). Now that is what I call a stimulus package.
This »FDIC Chairman” has obviously had her IQ deflated through into negative territory by this "oh so exciting once in a Chairman s career crunch".
What a country.
When it all come crashing down, I can't imagine there will be transferable liquid to take and use. I expect to see some kind of IOU system. It will be hard to buy things like food, with no greenbacks in hand. The food stamp program will go to 80%
considering that all big banks are still BANKRUPT and the absence of M2M accounting is just hiding this obvious fact, it's gonna be real pleasure to behold what banks are going to help FDIC(which is BANKRUPT as well).
so funny
This have something to do with the debt ceiling being reached within the next month and having the FDIC borrow from banks rather than the Treasury?
This is fucking insane.
Inspiring!
This has come full circle.
As we saw that the bailout of the AIG conduit was REALLY a bailout of GS, now should we begin to wonder if the bailout of BS was really a bailout of JPM, that the bailout of MER was a bailout of BAC...etc, etc, is a bailout of the FDIC?
Those FF are rising ANYTIME SOON.
76414
I see an Escher print, with hands on buckets dipping money from the government, to AIG, to GS, etc., back to the FDIC. Each trough being dipped from and into would be in the shape of a bank, some fine old building, or a skyscrapper without a roof. At the linkage of the FDIC, you have completed the loop with the government and it goes out to AIG again. The structure is a mobius strip.
it's totally normal to lend money to your insurance company. makes perfect sense.
/sarcasm
it's totally normal to lend money to your own insurance company.
/sarcasm
No doubt the banks will double dip interest on those loans. The road to anarchy will be paved with taxpayers bodies and their childs future.
Wow I mean talk about stealing from banks who did the right thing to give to ones who didnt. Capitalism is done for in America. When you cant grow as a buisness and have to bail out your competitors who made bad choices, why even start a business?
Sad time...
So let's get this straight. The Treasury borrowed from taxpayers. The Treasury gave money to the big banks to keep them solvent (or appear solvent). Now the FDIC is going to take money from the big banks to stay solvent. And big banks will most likely raise fees on the taxpayer's accounts to cover the FDIC's loan. So essentially the American taxpayer is giving money to their insurer to insure taxpayer money. Awesome!
I hear so much talk of bringing this motherfucker down and exposing it for what it is.
If you want to start something the first shot is fairly easy- get as many people as possible to start pulling their money from the bank and putting it in their mattress. That will bring this house of cards falling faster than Kanye West's rap career.
Would be cool if the FDIC declared BK (after having been bailed out by the banks)..haha
The whole situation is just getting so outrageous...I'm just amazed.
these guys are very creative. Just keep borrowing and lending money to each other and everything runs like clockwork.
A clock? Or like this?
http://www.abcteach.com/free/k/kitesrgb.jpg
Group A of banks chips in to the Reserve Rescue, with much fanfare, of course. Group B of banks declines to do so, for whatever reason. Other things being equal, which group contains more failed banks in the following year? And which group contains more White Knights, nobly stepping in to assume the valuable assets while the crap gets liquidated in bankruptcy?
And if all of that is too obvious, then doesn't it create a de facto obligation on all banks, even if they can't afford to increase their contribution?
The whole scheme is largely dependent on the Hail Mary pass of real estate stabilization and subsequent growth, a solid consumer/employment rebound and a massive inventory ramp up. All must happen within the next 12 months to prevent the banks from slipping into the abyss.
It's about Polyanna economic assumptions. The MTM game of extend and pretend has moved this game into overtime with just a few seconds left.
I don't understand why they can't just get more funds directly from the Fed, like everyone else. The printing press still works pretty well, right?
Don't much care for journalists that use an Anonymous source. Back in the day we had to have 3 independent sources and they had fancy code names. Pinch of salt on this one.
If the banks had to pay the required fees, most banks would go bankrupt. If they just lend it, they can keep the loan on their balance sheet, regardless the FDIC spends all this money. The game is just to get some more time. The last bank going bankrupt will be the winner.
The banks would rather the FDIC not borrow money from the treasury, as it is yet another bailout and they never know which bailout will be the one that finally gets fed-up citizens to break out the pitchforks.
Lending taxpayer money back to the FDIC (and collecting interest on the loans!) is a win-win. Banks make some extra taxpayer cash, and it's just opaque enough to confuse J6P.
It has been my pleasure to see the failure of FDIC. We have been with Regions for over 10 years.
We joined a credit union earlier this year. Especially once we learned that NCUA has billions of cash dollars backing thier money and our interest will more than double each month PLUS.... We become part owners.
We have already saved several hundred dollars in fees. We have already sought and found credit line stability with adequate support for liquidity that we occasionally need. There has been no surprises.
I am worried when FDIC breaks, the banks break and my town sees thousands of pissed off workers unable to do anything with thier money or have security... there is going to be trouble. Big trouble.
I can sit on my three months worth of cash and smile. But there are thousands of my neighbors who will not have more than the paycheck or unemployment in thier pockets. When the banks break, there isnt a credit union in sight in my town. One will need to be built asap.
That just kills me. I have to go out of state to do proper banking. Then again, I only have to endure a trip far away once a month to get cash.
I tell you this. If there is going to be problems it's going to happen when local banks quit and people are given IOU's to buy food and beer with. No merchant are going to accept that.
Then we will need the National Gaurd to quell the violence.
We can see this coming weeks or months before the actual imploding of the entire banking system.
People have laughed in the past and considered us NUTS when we told them to get the hell out of FDIC and into the credit union.
Who is laughing now? Me, I say... ME!!!!
What is it about this site that attracts such kooky, tin-foil-hatters? You should watch the movie and see that you are a caricature of the space monkeys. Life imitating art.
76896
You are not a very good troll. Have ya got anything bettern that? Come on tough stuff, you can do it. Make it funny and intelligent. Scathing critique, that's what I want to hear. Subtle puns, irony, I know you got it in you. I can smell it. Come on now. Bitch slap me wid dat whit.
Or keep your useless posts to yourself, c()nt. I can say that. It's politically correct. I have one. I am co-opting a tool of my oppression, transgressing boundaries, and reclaiming discursive power from my oppressor. I guess that actually makes you a tool.
Glad we settled that, b!tch.
You only want puns and irony? I usually demand bathos, parody a few metaphors, and a touch of sarcasm before the puns and irony. But that's me.
I have seen trolls that were artists, truly. This one is ill prepared for this site. Just thought I'd let em down easy before s/he really got hurt.
I'll admit it, I looked up bathos! :-)