Posted on 03/04/2009 11:45:13 AM PST by txmissy
WASHINGTON — The head of the Federal Deposit Insurance Corp. has warned that the fund insuring Americans’ bank deposits could be wiped out this year without the money the agency is seeking in new fees from U.S. banks and thrifts.
FDIC Chairman Sheila Bair acknowledged, in a letter to bank CEOs, that the new increased fees and hefty emergency premium the agency voted to levy last week will bring a “significant expense” to banks, especially amid a recession and financial crisis when their earnings are under pressure.
“We also recognize that assessments reduce the funds that banks can lend in their communities to help revitalize the economy,” Bair wrote.
But given the accelerating bank failures that have been depleting the deposit insurance fund, she said, it “could become insolvent this year.”
“Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative,” Bair wrote in the letter dated Monday to the chief executives of the nation’s 8,305 federally insured banks and thrifts.
(Excerpt) Read more at chron.com ...
Easier to justify nationalizing them, and Zero won't even have to worry about the pesky ol' stock market.
This was an extremely irresponsible public statement for FDIC Chairman Sheila Bair to make. The government is not going to let the FDIC go belly up. They may have to turn the printing presses on full tilt (as if they hadn’t already, and as if that was a good thing, ever), but they are not going to allow a run on the banks to occur.
Now that comment is based on the idea that this nation is not being attacked from within with the full intent to destroy it. I am not ruling that out BTW. This much stupidity doesn’t happen by accident.
They’re forcing the banks that didn’t make bad loans pay for the ones that did, just like they’re making the responsible homeowners bail out the deadbeats and speculators.
Ugh.
I think its going to get far worse than just this.
What about a regular Checking account?
Yep, that was the intent.
http://www.freerepublic.com/focus/f-news/2198595/posts
Importantly, the FDIC has the authority to directly tap the US Treasury for needed funds. However, this well may be running dry also. At some point, “bank holidays” are authorized, possibly with “cash runs” or even “paper runs”.
There are big differences here.
In 1933, the US Congress passed the Emergency Banking Act, which closed down banks with “bank holidays” to allow the government to figure out which were insolvent and transfer their holdings to solvent banks. Banks were closed from 4 to 300 days, at the same time that the gold of private citizens was confiscated. This resulted in the devaluation of the dollar by 40%. It was replaced by the creation of the FDIC.
But if the FDIC fails, likely some of the measures of the EBA would again be attempted.
If word leaks out that a bank holiday is planned, there will likely be a “cash run” on banks, as people seek to electronically withdraw their holdings and transfer them to safety. Senator Schumer recently caused a “cash run” on the IndyMac bank, by suggesting that it was in financial peril. Several of the Senator’s friends made enormous sums of money by selling IndyMac stock short before his announcement.
However, if this happens at a much broader level, confidence in national financial institutions will be so low that people will vie for “mattress money”, physical cash to keep in reserve in case there is a panic. Such panics were not uncommon in the 19th Century, and several occurred during the Great Depression. This is a “paper run” and will be dramatic.
The reason for this is that only 5% of US daily retail is backed by paper. Few bank branches have many bills on hand, so are quickly depleted in a paper run, even if they have substantial electronic reserves. This can quickly become critical because it would take the US Bureau of Engraving and Printing months to increase its production of paper money.
It also cannot substantially increase paper money denominations, because the vast majority of paper money is in $1 bills. Even $1000 bills would be nontransferable, because no one could make change for them.
So in effect, paper money and coins are already spectacularly deflated, and cannot *be* inflated, even if electronic money is inflated. Because in such shortage, by refusing to exchange their paper and coins for electronic transfer, the currency is split.
a couple of hours ago i was at my bank, a local nationally chartered bank, and it had a sign which said it had chosen not to participate in the new fdic program, but that non-interest-bearing accounts would continue to be insured up to $250,000 through the end of the year. i didn’t know what to make of it and still don’t, really.
Invest in wheelbarrows.
>> You mean we aren’t broke already?
No.
If the Fed’s balance sheet was yours, or mine, we’d be out today getting measured for our barrel.
But the Fed plays by different rules. For example, it’s illegal for you or me to kite checks. But the Fed just renames it “monetizing the debt” and away we go!
Besides, the Fed has a tougher job. You and I are just irresponsible for ourselves and maybe our dependent children. But it’s the Fed’s job to apply breathtaking irresponsibility not just to the current generation(s) of Americans, but to multiple generations as yet unborn! This is the principle of “compound irresponsibility”, and the Fed takes it VERY seriously.
Ask them. The banks that avoid this scheme will be richly rewarded if they survive the governmental onslaught IMO.
RE: “Looks like I will be purchasing a safe and install in the concrete floor. Then I will remove all funds from banks and investment firms. After the Obama induced collapse of the financial system cash will be king.”
********
I’ve been wanting to do this for some time. Problem is, if all banks, FDIC, etc., collapse, will any money we saved be worth anything anyway — even if hidden in a “safe?”
The FDIC is as solvent as the US Gov’t, at the end of the day, like the FSLIC was in the 80’s.
-—They’re forcing the banks that didn’t make bad loans pay for the ones that did, just like they’re making the responsible homeowners bail out the deadbeats and speculators.——
You’re right, and they’re mad about it (the good banks). One answer provided by the guvmint is that if they (guvmint) provide a bailout to the FDIC, then that would tar all banks with the ‘bailout’ brush. FDIC insurance is supposed to be funded by member banks, not taxpayer dollars.
If, indeed, the FDIC receives a bailout, then it could be argued that the entire banking system has eaten the food of the White Witch.
It will get a bailout so no big deal..... Unless K0mrade Zer0 runs out of bailout cash
Which can happen when foreigners stop buying US T Bills
Unfortunately, we - the taxpayers - won't see a dime of that. The printing press is for the elitist government only, not us little people. Just transferred every dime from my ING savings out to cash. Takes two days - I'll be biting my nails 'til it gets here.
That was excelent work...and the end game is now clear...
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