FDIC wants pension funds to prop up failed banks

FDIC wants pension funds to prop up failed banks

Over 140 U.S. lenders folded in 2009 alone. To remedy the financial void left in their wake, the Federal Deposit Insurance Corporation wants public pension funds, which safeguard the retirement funds of millions, to buy in part or in whole the banks that couldn't manage to keep their depositors' funds.

"Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets," anonymous sources reportedly told Bloomberg News.

In a speech to the National Association for Business Economics Washington Policy Conference, FDIC Chairwoman Sheila Bair outlined what she called "a pre-funded resolution mechanism," but did not specify what exactly that is. She instead said it would be "similar to the FDIC's receivership authority for failed banks," exposing only shareholders to risk, as opposed to the bank bailouts that saw billions of taxpayer dollars funneled into a near-crippled financial system.

"Shareholders and creditors would bear the losses, not the public," she explained. "But, the process would be orderly and help prevent a catastrophic collapse of other firms."

"From this speech, it's a little unclear whether or not Bair has a more simplistic view, where a resolution authority would just close troubled firms," wrote The Atlantic's staff editor, Daniel Indiviglio. "Right now, most banks are just wound down by the FDIC with failure looming. While that's one option, if the market could be saved from some additional losses associated with outright failure without taxpayers bearing the cost of keeping a firm going, then I don't see why regulators wouldn't want to include that option as well."

Bloomberg News notes that pension funds in Oregon, New Jersey, California and New York may participate. The wire service also reported that firms being targeted for the plan control over $2 trillion in retirement funds.

"Investing in distressed banks doesn’t always pay off, as the U.S. Treasury Department learned with the Troubled Asset Relief Program," Bloomberg added. "At least 60 lenders skipped some of their promised dividends to the TARP fund, according to SNL Financial, and a $2.33 billion stake in CIT Group Inc. was wiped out last year when the lender went bankrupt."

"The House has approved a bill to create a $150 billion fund, while the Senate is considering a measure that would first use taxpayer funds to dismantle an institution, with those funds later recouped from banks," MarketWatch noted.

A total of 26 U.S. banks have failed so far in 2010.

The FDIC holds about $40 billion of assets from seized banks and expects to gather more as institutions continue to collapse after the worst U.S. recession and real-estate slump since the Great Depression, according to agency officials," iStockAnalyst reported. "Real estate loans at U.S. banks that are at least 90 days overdue or that are expected to default almost doubled in 12 months to 7.1 percent, according to December FDIC data."

Anyone who knew what was the real aim of this economic ``crash`` knew this was coming sooner rather than later, well there it is.

This might be the red line of many people... Those goddamn banks will just not steal our future by the way of dollar devaluation, but also come and directly take our money in our bank account. Ain't that nice?

Now I ask you, who in their right mind would want to give a failed bank their retirement funds? To help prop it up? Yeaaa riiiight.

I think they are pushing people now with this stuff. Instead of letting these banks just fail like they should have done in the first place, nope, now beings the Fed is done printing money, they now want to turn to the last ditch push and get the only money that`s left. Your saved money. Talk about a ploy. I do believe that it is true what they are saying now about TPTB. They want to push people over the edge. Collapse the present banking system after you part the people and what little money they have. Then start a new system of their choice.....not of your choice.

It makes you wonder what these yahoo's are thinking (or not thinking to be sure). How is it not risky for pension funds but too risky for private equity managers? That is patently idiotic! To add insult to injury, it's for failed or failing banks???? Yeah, let's throw some more good fiat money after bad so the banksters can give themselves more bonuses. I'd say the plan is retarded, but that would be an insult to retards (who in many cases are really good people).

Someone had better tell Sheila Bair to take her head out of Gietners @ss, go soak her head and then give it a damn good shake, cause that dog don't hunt here (at least it shouldn't).

Cheers - Dave

As if pension funds don't already prop up failed banks by loading up to the gills on their stocks and other instruments. And let's not forget various "consulting fees" and whatnot. Moreover, toss in instruments not directly related to banks per se but that are held in large quantities by funds and banks, and would hurt financial institutions mightily if dumped en masse.

Prudent exercise of control over companies by shareholder voting...where is it when we need it? Why are the real owners (shareholders) letting the boards of all sorts of companies (not only financial ones) get away with sheer reckless incompetence? I'd like a side order of ACCOUNTABILITY please. Why is that so hard to get?

This isn't meant to be insensitive,but I've never been happier about having "nothing" in all my life!

Those who have saved their whole lives and looked forward to retiring responsibly are in for a terribly rude awakening. My heart goes out to them.

Originally posted by On the Edge
This isn't meant to be insensitive,but I've never been happier about having "nothing" in all my life!

Those who have saved their whole lives and looked forward to retiring responsibly are in for a terribly rude awakening. My heart goes out to them.

Remember, they tried to get our 401k's twice in a year. One time to have put all our 401k's into SS to give us a guaranteed retirement (which doesn't make sense since we have been paying into it and the govt. has been borrowing the money from SS and replacing it with IOU's, so all they have to do to fund SS is to redeem those IOU's yea right.). The second time a few months back they wanted our 401k's to be invested 20 percent into annuities, and you can bet a million dollars that the guaranteed annuities will be in US Treasuries don't laugh its backed by the FULL CREDIT AND FAITH OF THE US GOVT..

What should be said here is why is the FDIC (Federal Depositor Insurance Corporation) needing private equity and state pensions to help it to prop up these bad banks and their assets. For one why aren't they going to the govt. to get funded. Two why should I risk my pension and equity funds on bad banks (in essence the FDIC is trying to lay the risk off on states essentially). Three, it doesn't fill me or anybody with an IQ over mud with confidence that the FDIC can't run to the govt. for funding (for some reason) and are trying by hook or by crook to con pensions and other private/state funds to invest in this junk.

You know your country is in trouble when the govt. is trying to take your pension funds, and if you don't think they will do that then google Argentina's president want access to state pension accounts.

reply to post by Vitchilo


Its not enough that the Fed has stolen Trillions of $ from our grandchildren to fund the super mergers in banking. Now they want to steal from retired or soon to be in order to ensure that the commercial real estate collapse touches..no kicks in the nads... each and every American citizen.

Yea lets just watch American Idol and let those that "know better" run the country!

It figures. A bankrupt government wants to steal the last remaining savings from its' people so it can finish it all. After they get all the money then we get hyperinflation to finish the job along with total collapse. Except we'll take the whole world with us just like we did last year.

Gee, let`s get this straight. The Fed told Congress they are not going to print anymore money, ok, now, the FDIC wants to use everyones 401k`s to prop up failing banks. If they do manage to pull off getting these funds from the people, and give it to these banks, and the banks go under, where is the FDIC going to get the money to cover what was lost? The Fed? No, beings they aren`t printing anymore. Remember, the FDIC is run by the government, and they have no money, and their tax base keeps getting smaller and smaller as people are put out of work.

Maybe i`m missing something here. The FDIC is run by the government, last year the FDIC was almost broke, and even back then, they had a plan to borrow, borrow mind you, money from the banks. The same banks that got the bailouts. This must have fallen through if they are now looking into taking our 401k`s. So, our tax money bailout wasn`t enough, they want the last few bucks people have for retirement? Oh yea, this picture looks real nice.

This is a great picture of the mindset of those running this country. The banks will only lend to those with triple A credit, that means that they in turn are doing nothing but setting on all of the money. If these banks aren`t going to loan that bailout money to the general public, then why not take it back? Oh, that`s right........to big to fail.

Well, all in all, it always falls back on the people one way or another. The big boys get the elevator, and the people get the shaft. Don`t be shocked if you hear someone yell........drop the soap.

18 odd months ago the US (not Canada) suspended the mark to market rule that required banks to book the value on their sheets what their real estate was worth as opposed to the mortgages they held against them.

From that day on, the US banks have been living a lie - as has the entire US financial system.

[edit on 14-3-2010 by leo123]