View Full Version : FDIC is Broke!

11-24-2009, 11:18 PM
The FDIC Is Broke (http://market-ticker.denninger.net/archives/1660-The-FDIC-Is-Broke.html)

Yes, really.
Off the wire this morning:

FDIC Deposit fund had negative $8.2B balance in Q3
That's broke. Bankrupt. Kaput. Gone. Poof. Dead. Rotting. A corpse.
Yes, yes, I know, Treasury has their back. But let's not forget - The FDIC does not have a legal "full faith and credit" guarantee from the US Federal Government and Treasury.
It has a "sense of Congress" resolution, but not a formal, legally-binding guarantee.
I am not, by the way, predicting an actual FDIC failure to pay. Should such an event happen it would be tantamount to a declaration of revolutionary war (by the government about to be deposed!) as if there is one thing that would cause Granny to reach for her shotgun, it would be getting screwed out of her life savings after Sheila Bair and everyone else in our government has trotted out how their money is "fully safe" and that "nobody has ever lost a penny of insured deposits and never will" for more than 20 years, including lots of pronouncements of exactly that mantra over the last year.
Nonetheless this outlines the underlying problem the FDIC has - it has willfully and intentionally ignored the fact that banks have mismarked their "assets" to overstate their values, it has refused to demand that accounting be done on a strict "mark to market" basis by bank examiners, and indeed, it has backed the "extend and pretend" commercial real estate "rollover" provisions of recent months, all of which is manifestly unsound, intentionally misleading, a consequence of willful refusal to enforce 12 USC Ch 16 Sec 1831o ("Prompt Corrective Action"), and has led to enormous losses being absorbed by the Deposit Insurance Fund that should have never happened.
The result?
Let's put this in common-man terms:

Congratulations Sheila - is that your resignation I see in your hand or is that your promotion from Obama - after all, we all know that in Government the more you screw up and screw the taxpayer, the better the job you're offered.
One final question: Is the only thing preventing panic and bank runs the sheer stupidity of The American People?

11-25-2009, 08:00 AM
Isn't there some political website you can visit, just to vent?

Gas Man
11-25-2009, 01:48 PM
zam... I like having you around. However, I'm with tele, I don't like politics and such on mc forums. Never does much good.

11-25-2009, 02:39 PM
Hell yeah! fvck politics, Lets have more chain lube threads. I like WD40 myself.

11-25-2009, 07:35 PM
Personally I don't mind, cause I'm hooked on trying to make money in the market. Just don't start talking about religion.

11-25-2009, 08:14 PM
Why have an off topic lounge then? You don't have to read them.

11-25-2009, 08:23 PM
Hell yeah! fvck politics, Lets have more chain lube threads. I like WD40 myself.

I posted this post, because of that same attitude which in turn when you lose all your money in your retirement or maybe now in your bank account you can't say you weren't warned right here on 2wheel!

11-26-2009, 08:39 AM
I kid zam, as far as I'm concerned, post whatever you want. You did post in the off topic section, like you said, if you don't want to read it, DON'T. This board is to small as it is and trying to censor people ain't right. just my 2 cents.

11-26-2009, 09:17 AM
My post wasn't meant to get you to stop, I don't care. My point was that since these types of posts typically get almost no response in here, you'd probably be able to work up a good debate in a place where they discuss politics. It can be frustrating to post a subject about which you're empassioned and have it ignored. I suppose I could've been clearer in my first post, apologies.

11-26-2009, 10:07 PM
Why have an off topic lounge then? You don't have to read them.

I agree.

I think Zamochit is old enough to know there are political forums. I'm sure he feels like a family here and feels he can post this sort of stuff and discuss it with his family. This is a MC site but it's also a community and I, for one, like having all types of discussion here.

11-26-2009, 10:19 PM
i don't understand how there broke.

11-26-2009, 11:38 PM
Well, the FDIC refused to close banks until they were, 30, 40, 50% underwater on asset prices. Why? Only answer I can give is bad regulation or willful blindness. The FDIC refused to disclose REO auction results in a raw attempt to prevent the market from realizing the truth, these assets are impaired and there are hundreds of banks and other institutions that have securities backed by these assets that are worth far less than their face value.

There are over $10 trillion worth of mortgages outstanding (according to Fed Z1), of that over half is linked to Fannie and Freddie. I am sure you know of the trouble these two have right now. Deutche bank has estimated that half or more of all home mortgages will default by the end of next year.

Also, we have lossed around 100 banks so far. Just recently a bank in Alabama went belly up and that bank was regarded as one of the top banks in the country. In fact I think it was ranked 2nd in asset holdings. If I can find the article I'll post it up so you can read, if interested.

And finally, I get a lot of arguments about how we survived the tech bubble and the S&L crisis blah blah blah. Yes, we did, but this is a credit recession and cannot be fixed by printing money and creating more debt, because its the debt that we have already that put us here. Companies that we were told would never fail have and we turned and bailed them out and they are still up to their necks in debt, just now with us or should I say the gubernment.

Hope this helps clear things up Junkyard. If not I can back up or present to you any informaion you need.