I didn’t see this posted - sorry if it’s a duplicate.
This really, really worries me.
What? You mean it’s possible that the much vaunted FDIC, guarantor of multi trillions of America’s gold, is not worth the paper it’s made of?
A lot of banks are teetering close to insolvency, and the FDIC wants to increase the fees they charge to the banks by more than 200%.
This will only increase the number of bank failures because some banks won’t be able to absorb the added cost.
Increased failures will result in more funds being drained from the FDIC.
What a vicious little circle.
Is the Sheila trying to spark a bank run??
I think they are trying to precipitate a run on the banks.
That does it. I’m getting out my shovel and my shoe box.
Expect an announcement in the not so distant future. The FDIC label will only be available on ‘accepted financial institutions’. Politically accepted (read nationalized). I hope I’m wrong, I can’t see this going any other way though.
Pay careful attention to that sentence. The FACT is, there is no FDIC "set aside" that, once depleted, means the Fed can't or won't make good on insured deposits in a failed bank. FDIC insurance is just a part of the general public obligation (like social security or medicare). The fund "balance" is an accounting tool -- a way to tell if banks are ON THE AVERAGE kicking in enough to fund expected payouts. The fact that the balance in the "fund" goes "negative" will NOT preclude paying depositors in failed institutions.
Repeat for emphasis: the FDIC won't "go broke" unless the whole government "goes broke".
Sheesh. What a way to create public panic and a run on the banks! Irresponsible, IMO.
Not good...
There was a story the other day about increased requirements for banks from the FDIC.
Rot Ro Relroy!
Holy schnikes!
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.
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.
So if they’re worried FDIC is going broke, that probably means it already is.
so...who still trusts the govt? It was the FDIC that caused the s&l crisis after Garn-St Germain upped the limits thus creating moral hazard (see http://www.realclearmarkets.com/articles/2008/10/the_fdic_and_how_soon_we_forge.html)
. Now the limits are even higher. So of course the FDIC is in big trouble.