Free Republic

FOR all the criticism of bailouts since the financial crisis struck, virtually no one has suggested that depositors in banks be made to suffer along with their investors, employees and customers. Until this week, when the euro zone proposed that, in return for a bailout of the failing banking system in Cyprus, depositors pay a “tax” of 6.75 percent of their deposits — 9.9 percent for deposits above 100,000 euros. Because bank deposits in Cyprus, and virtually everywhere, are insured, the plan shocked many people who figured that this insurance was the one financial safety net that was still truly...

SYDNEY, Oct 10 (Reuters) - The U.S. government is weighing guaranteeing billions of dollars in bank debt and temporarily insuring al U.S. bank deposits, in a bid to unfreeze bank lending and staunch massive losses in equity markets, The Wall Street Journal reported on Friday. The New York Times reported that U.S. and British officials were converging on a similar blueprint to stem financial chaos involving injections of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans. MORE http://www.reuters.com/article/marketsNews/idUSSYD37289020081010 U.S. Weighs Backing Bank Debt Removing Deposit Insurance Limits Also on the...

FDIC Fund Strained by Bank Failures May Lift Premiums (Update2)

By John Poirier WASHINGTON (Reuters) - U.S. regulators took over two banks on Friday and sold them to Mutual of Omaha Bank, the sixth and seventh bank failures this year as financial institutions struggle with a housing bust and credit crunch. ADVERTISEMENT Two weeks after the Federal Deposit Insurance Corp seized IndyMac Bancorp Inc (Other OTC:IDMC.PK - News), the Office of the Comptroller of the Currency said it closed First National Bank of Nevada and First Heritage Bank NA of California. First National had total assets of $3.4 billion and $3 billion in deposits while First Heritage had assets of...

Remember the 1980s savings-and-loan crisis? By the time it had all played out, taxpayers were on the hook for $125 billion. Yet members of Congress who play a central role in regulating the banks seem to be suffering from a severe case of collective amnesia.... That's the only conclusion to be drawn from the recent 413-10 vote in the House of Representatives in favor of legislation that would recreate some of the same perverse conditions that magnified the taxpayer cost of the S&L bailout. The bill would increase federal deposit insurance to $130,000 from $100,000 per account and double the...

Incredibly, Congress is considering raising the current deposit insurance ceiling for banks from $100,000 to $130,000 for individual bank deposits and to $260,000 for certain types of retirement accounts. This move should be stopped. The last time Washington hiked the limit (in 1980, from $40,000 to $100,000), it helped fuel the catastrophic savings and loan collapse. A mini-industry grew from brokers who sold high-yielding bank CDs. Customers did not care about these institutions' financial soundness; after all, Uncle Sam was guaranteeing the deposits. These banks, particularly the S&Ls, went on a lending binge. Small banks say they need higher insurance...