"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia,"
In job postings on its Web site, the FDIC said it is looking for people with "skill in performing duties associated with a financial-institution closing, such as receivership management, resolutions and/or asset disposition; knowledge of the resolutions process as it relates to complex financial institutions."
The FDIC is ramping up it's staff to deal with the fallout of the current state of the economy. Bank failures are on the way so they're bringing back retirees, advertising in newspapers and posting jobs to their websites. These jobs pay up to $180k per year so you know they are going to have to justify that kind of expense going forward. The cost of these actions speak to the fact that they are not just cautionary but will indeed be needed.
The writing is on the wall and my money is still on the likes of Citibank as a prime candidate for a spectacular failure.
During the Savings and Loan crisis the staff at the FDIC numbered almost 15 000 and has since fallen to 4 600 during the "good times". While they are ramping up for the next crisis looming on the horizon some people still claim the economy is strong and doing fine.
The Bush administration is in denial.
If this action by the FDIC isn't a harbinger of things to come, I don't know what is.
One more thing, did you notice this?
At the end of 2007, it had $52.4 billion in its fund that backstops the nation's insured deposits.
I'm not an expert on the subject of deposit insurance but I feel I need to point out what I have found in the past about the FDIC:
DRESSED UP FOR THE PROM
The FDIC deposit insurance has a number of problems. It encourages risk taking by insured institutions to a degree that they probably would not do if they did not have this government safety net. It also causes a certain neglect by depositors who simply don’t worry about their money being in a fragile bank because they are convinced that the government will print the necessary money to pay them off if the bank fails. The whole deposit insurance scheme actually backfires..
If there was a massive failure, it might take years before the FDIC could actually figure out how to get the necessary dollars to individuals. No one considers the fact that if such a scenario developed by the time you got the dollars, they might be worthless. To consider the government as the lender of last resort and the ultimate bale out of all financial emergencies is to seriously misunderstand the complexity of what can converge. Simply printing money to neutralize a crisis doesn’t necessarily have the effect that people think it does.
Ultimately who pays for the FDIC insurance if not you?
THE LIQUIDITY CRISIS OF 2007 - A Question and Answer Survival Guide
Doesn't FDIC insurance mean that bank deposits are safe now?
FDIC insurance isn't really insurance, it's a pool of money to be used to buy up enough bad loans off the failed bank's books to make it attractive to a potential buyer. It's not used to pay back the depositors.
It only works when bank failures are isolated events, and will not work in a systemic crisis.
The purpose of FDIC insurance is not to really guarantee the safety of the banking system, but to prevent runs on banks by reassuring investors that their accounts are insured. Bank failures, however, are not really an insurable event.
The FDIC can't handle a systemic banking crisis or for that matter one really big bank failure.
Market WrapUp
The deterioration in the banking industry is best illustrated in the Federal Deposit Insurance Corporation’s (FDIC) Quarterly Banking Profile. The report for the second quarter of this year was released a few weeks ago and the deterioration in bank balance sheets is clearly visible.
There were 824 institutions reporting net losses for the quarter, ... The proportion of FDIC banks that are unprofitable rose to nearly one out of every ten banks
The report suggests that eroding credit quality is spreading beyond home mortgages as all major loan categories ... Imagine what the banks' balance sheets are going to look like in the third quarter when they reprice their mortgage-backed securities.
BEHIND CLOSED DOORS
Most people look at the FDIC sticker on a bank’s door and assume that they are safe and that if there ever is any problem, the government will always bail them out. Few realize the increase in the size and scope of FDIC bailouts since the U.S. came off of the gold-exchange standard in 1971. Fewer still realize that it is completely up to the FDIC’s discretion to decide which banks it will bail out and which deposits it will insure and which ones it will not.
FDIC Insurance Scam
Former FDIC Chairman William Seidman charged that the 1980 increase in insurance coverage gave the savings and loans "a $100,000 credit card issued by Uncle Sam and made the government a full partner in a nationwide casino...."
Congress needs to find ways to limit the liability of the insurance funds and the risks to the taxpayers, not increase them. There is no justification for an increase in the insurance coverage which many experts feel is already excessive and a negative influence on the safe and sound operation of depository institutions.
Spitting in the Eye of a Hurricane
The FDIC is a joke. Walk into a local lender and everybody and their dog has signs saying everyone is insured up to $100,000 on all their accounts.
...the FDIC does not have the liquidity to bail out ... without Alan Greenspan inflating the heck out of the current fraud money system. When you get right down to it, the FDIC doesn’t have enough money to bail out ... if every FDIC insured lender went belly up.
Believing that the FDIC (or the CDIC here in Canada) will come to the rescue of your money under a real economic emergency (a series of bank failures) such as they had in Brazil recently or Germany pre-WWII is more than a bit naive IMO.
Especially, if you're counting on that money to make the monthly rent.
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edit: expired link updated
[edit on 2/27/2008 by Gools]
