What Happens When The FDIC is out of Money?, page 1

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Topic started on 24-7-2008 @ 05:06 PM by L.HAMILTON

What Happens When The FDIC is out of Money?

theinternationalforecaster.com...

Financial sector statements dont add up, FDIC reserves pounded hard from IndyMac debacle, bailouts will soon come at the expense of the consumer, bond market watch, realities of a debtor nation, financial institutions given protection from shorting
So far this week we saw Wachovia get socked for an $8.86 billion loss with a layoff announcement of 10,750 employees, while Washington Mutual got hammered for a $3.3 billion loss and increased its beleaguered loan-loss reserves by $3.74 billion to $8.46 billion as it announced expense cuts and asset sales. This is nothing. This is just the beginning. This is just window dressing to protect incumbents. Together with the science fiction and fantasy we got last week from the banking sector, these latest financial statements from the banking sector should receive a Nebula Award from the Science Fiction and Fantasy Writers of America. Gene Roddenberry could not have dreamt up financial statements that were more phantasmagoric.

(visit the link for the full news article)

Mod edit... please don't cut and paste the whole article!

[edit on 24-7-2008 by Byrd]

[edit on 24-7-2008 by Byrd]

reply posted on 24-7-2008 @ 05:06 PM by L.HAMILTON

Bailouts will be at the expense of the consumer.

Super Losses, Super Layoffs, Super Bailouts
(visit the link for the full news article)

mod edit: fixed link

[edit on 7/24/2008 by Gools]

reply posted on 24-7-2008 @ 05:13 PM by ALightinDarkness

reply to post by L.HAMILTON

A common myth. FDIC funds are collected by membership fees from member banks. What happens when money runs low? Membership fees are raised. Although at this point in time there is not much doom and gloom outlook on banks, so they may not even use up their current reserves.

reply posted on 24-7-2008 @ 05:27 PM by SystemiK

I was just reading that article earlier today. Here is a working link to the article in the OP.

I'm not sure what you've been smoking ALD, but I'd like some....

24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.

25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.

Source

www.marketoracle.co.uk

reply posted on 24-7-2008 @ 05:32 PM by solo1

Thats crazy don't you know they have a printing press in America that prints cash out 24/7
they wont default ,but inflation will hit harder than any
American alive today can imagine.

reply posted on 24-7-2008 @ 05:37 PM by Bunch

Simply put the Treasury Department will inject money to the fund to protect consumers that at the end are going to pick up the tab AGAIN! This actually would be a bail out that I would have no problem with after all the gifts given to private and GSE's entities.

reply posted on 24-7-2008 @ 05:41 PM by mybigunit

They will never run out of money. The FDIC is a branch of the reserve which will just print the money to give to them and we the taxpayer will have to pay for it via the inflation tax. Cool isnt it?

reply posted on 24-7-2008 @ 05:42 PM by jefwane

I think we may find out soon. I can think of two very large regional banks that individually would tap out the entire FDIC reserves were they to fail. LiD is right that fees are how FDIC is funded, but I think L. Hamilton's question is what if one or a group of them is bigger than FDIC's balance sheet. LiD must not have been watching the market today because the banks were leading the way down. I think it might have been some profit taking on two weeks of historic gains in the sector, but it could be a return to reallity as well. The two reasons i think Financials have rallied so hard lately are bottom fishers thinking they are getting a great deal (if they sold today they are) and buyers thinking that if the GSE bailout passes banks will be able to shove all that bad paper over to them and force the taxpayer to eat it. I have no doubt in my mind that if a large bank or group of smaller banks fail and encumber the FDIC balance sheet that the Treasury and Congress will act swiftly to cover them.

[edit on 24-7-2008 by jefwane]

reply posted on 24-7-2008 @ 06:00 PM by burdman30ott6

Unless I am completely misunderstanding these figures, I believe the federal reserve has been operating in the negative since January.
www.federalreserve.gov...

That minus $122 Billion in the "unborrowed" column says to me that they are now working entirely with racking up Federal Reserve debt in order to provide these auctions to the banks.

Please feel free to correct me if I am wrong here, but doesn't that basically say the Fed is broke?

reply posted on 24-7-2008 @ 06:12 PM by ALightinDarkness

Originally posted by SystemiK
I'm not sure what you've been smoking ALD, but I'd like some....

Its this new thing called reality. Some of the doom and fear mongers on ATS like yourself should try it, its a refreshing change of pace to get away from the media propaganda.

That was about as clear of an example of fear mongering and outright spinning that I've ever seen on ATS, and that is saying something. The underlying assumption is somehow that every single dollar in the banks is going to fail, which is simply wrong. The total amount of deposits in banks could be $5 trillion, it doesn't matter when little of it is projected to failure. Classical attempt to fear monger.

FDIC is insurance, and you will find upon doing your research that _GASP_ no insurance company has on hand enough assets to cover all of its liabilities. That would be because the insurance polices they have written are not going to occur all at once, and most won't ever happen at all. Yet, I see no hysteria and fear mongering over this fact?

And whoever said "OMG ALID IS WRONG B/C THE STOCKS WENT DOWN TODAY THANKS TO BANKS" - you have got to be kidding me. The market is not an indicator of bank failures, its a indicator of investor hysteria or euphoria. The data on bank liquidity, sadly, is not in the doom and gloom camp - looks like we won't even get close to all the bank failures some of ATS was hoping/praying for.

[edit on 24-7-2008 by ALightinDarkness]

reply posted on 24-7-2008 @ 06:13 PM by jackinthebox

I've read that the FDIC has something like 20 years to pay up on a claim anyway. So I don't think they're really worried about it.

EDIT to add: Also interesting to note that only a small fraction of our economy is in actual printed Dollars. The rest is just computer blips.

[edit on 7/24/0808 by jackinthebox]

reply posted on 24-7-2008 @ 10:41 PM by L.HAMILTON

reply to post by Bunch

I totally agree the Treasury Department will inject more money into the funds and the consumers will pick up the tab.

reply posted on 24-7-2008 @ 11:34 PM by Quazga

reply to post by L.HAMILTON

I heard on NPR the other day that the FDIC has something like 54 Billion with which to insure deposits.

reply posted on 24-7-2008 @ 11:47 PM by L.HAMILTON

reply to post by Quazga

Likewise, although 54 billion wouldn't last to long , should we have another "Run on the banks , like what happened in the 1930.

[edit on 25-7-2008 by L.HAMILTON]

reply posted on 27-7-2008 @ 12:34 PM by L.HAMILTON

With regulators siezing more and more banks ,We might soon find out.

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