In FDIC We Trust?

I noted in my previous post that the FDIC is better run than most financially oriented government agencies in this mess, logistically, but I dropped a parenthetical that they were not financially prepared for this mess. No fault of their own, but the mess is bigger than their piggy bank and they need avenues for financial support. There are some and they will be needed. The piece I am linking discusses the FDIC in more detail along with some of the challenges that face them (along with some dirt on what their PR guy is saying versus reality). Well worth the read.

And to add to the FDIC problems, the former parent of Washington Mutual is suing the FDIC for $13 billion. Apparently the parent did not like the deal the FDIC worked out with JP Morgan (JPM).

The FDIC has indeed had some very tough questions over the past few months. There was a fair amount of debate on the deal they worked out for Wachovia. There was some speculation that the FDIC worked the initial deal with Citigroup (C) as a stealth way to prop up Citigroup. This was undone when Wells Fargo (WFC) came in with bid for a better deal - supposedly so Wells Fargo could take advantage of certain tax benefits of the Wachovia losses.

The Question of the Day - Is This a Dead Cat Bounce?

Yes. I was tempted to leave it at that - a one word answer of yes, but people need reasons. Let's start with Geithner. What he is proposing on the public/private partnership is simply not about to work. Yves at Naked Capitalism explains it well, and it is not pretty.

Disclosures: None.

Comments

[billp37]

"The holding company for failed savings and loan Washington Mutual Inc, has sued the Federal Deposit Insurance Corp. for billions of dollars in claims in connection with the September seizure and sale of the Seattle-based thrift to JPMorgan Chase & Co.

The complaint, filed March 20 with the U.S. District Court for the District of Columbia, seeks to recover billions in tax refunds, capital contributions and trust securities in the wake of the regulators' seizure and $1.9 billion sale of assets to JP Morgan Chase.

Press accounts estimate WaMu's claim against the federal regulator at $13 billion. ..."

www.bizjournals.com/po...

2009 Mar 22 09:09 AM

[billp37]

Maybe we should worry about NCUA too?

"March 21 (Bloomberg) -- U.S. regulators may rebuild the network that helps fund retail credit unions after seizing two corporate lenders with $57 billion in assets to halt an erosion of liquidity.

The National Credit Union Administration, regulator of a banking network for 90 million customers, yesterday took over U.S. Central Federal Credit Union, in Lenexa, Kansas, and Western Corporate Federal Credit Union in San Dimas, California. So-called stress tests at both lenders found an “unacceptably high concentration of risk” from mortgage-backed securities, the agency said in a statement. ..."

www.bloomberg.com/apps...

2009 Mar 22 09:27 PM