F.D.I.C. May Borrow Funds From Banks

F.D.I.C. May Borrow Funds From Banks

www.nytimes.com

Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

(visit the link for the full news article)

This is getting ridiculous! The FDIC is in a serious position here.

These people are just playing a shell game with the intent on consolidating all banking withing the 5 mega banks. The quote above:

That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

is not really accurate because this action will not "rescue" failing banks -

Since January the F.D.I.C. has seized 94 failing banks, causing a rapid decline in the deposit insurance fund.

So which is it - "rescue" or "seize"? It will be the later.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.

Bankers worry that a special assessment of $5 billion to $10 billion over the next six months would crimp their profits and could push a handful of banks into deeper financial trouble or even receivership. And any new borrowing from the Treasury would be construed as a taxpayer bailout that could open the industry to a political reaction, resulting in a wave of restrictions like fresh limits on executive pay.

The lending banks would receive bonds from the government at an interest rate that would be set by the Treasury secretary and ultimately would be paid by the rest of the industry. The bonds would be listed as an asset on the books of the banks.

Edit to add: For an overview of why the FDIC is in this situation see this thread by Dbriefed: Is The FDIC Still Solvent?





www.nytimes.com
(visit the link for the full news article)

[edit on 22/9/2009 by Iamonlyhuman]

I was wondering when Karl Denninger from Market Ticker would weigh in on this. One of his comments on this story says it nicely.

market-ticker.org...!-FDIC.html

Who would have thought that a government agency would actually contemplate paying the insured party for the coverage on their own risk?

With Commercial Real Estate and Option ARM/ ALT-A resets hitting their already rotten balance sheets, where are they supposed to be getting this capital? They are putting off the inevitable PRINT or DEFAULT. They should just get to it already.

So the bank executives make bad decisions;

1. The public bails them out.

2. The executives give themselves huge bonuses with our money.

3. They loan us back our money. . While charging interest!

That, my friends, is bizarro world! !

It seems to someone uneducated like me, that this is another way to conceal the consolidation of bank assets.

The government will play the patsy and actually commit MORE taxpayer responsibility for footing the bill to enable even more concentration of wealth into the transnational banking corporations.

Sometimes I think they should just stop pretending and make it all one bank, to which every nation must pledge allegiance or face war.

I don't know what to say

Does this make sense to anyone other than to the regulators?

Oh what a tangled web we weave,
When first we practise to deceive
- Sir Walter Scott - [.i]