Who Do You Believe: The FDIC or Hard Facts?

Now for some facts, after you watched the government propaganda. All of these facts, unlike that propaganda, are in fact mathematical realities.

From Bloomberg:

The agency’s deposit insurance fund, supported by fees paid by banks, fell to $13 billion in the first quarter from $17.3 billion in the preceding three-month period. The FDIC has imposed an emergency fee to raise $5.6 billion to rebuild the fund, with more assessments possible this year. The agency forecasts failures will cost $70 billion through 2013.

The FDIC lost most of its $50 billion original stake due to mismanagement, refusal to close troubled institutions, and according to the Office of The Inspector General:

May 21 (Bloomberg) -- The Office of Thrift Supervision authorized “inappropriate” backdating of capital by six institutions, including IndyMac Bancorp Inc., that led to “misleading financial reporting,” the U.S. Treasury inspector general said in a report.

Oversight failures were “very serious” and included a senior deputy director in August instructing a lender to backdate and a regional director authorizing revised accounting, according to the report today. OTS left unchanged revisions at three unidentified thrifts. Republican Senator Charles Grassley said the actions were “completely unacceptable” and a congressional subcommittee planned an investigation.

IndyMac subsequent to this event failed and has cost the FDIC insurance fund a very substantial amount of money and we are not even being told who the other three institutions are or whether they are still operating!

How much is the $13 billion in FDIC insurance?

The FDIC insures 4.8 trillion dollars in deposits in US banks and thrifts, and yet they have 0.27% - more than two-thirds less than they had a bit more than a year ago - in money to "cover" those deposits.

It is true that the FDIC also has the ability to borrow (up to $100 billion now, and they are trying to secure the ability to borrow up to $500 billion) from Treasury should they run short of money.

It is true that nobody has (yet) ever lost one penny of insured funds at an American bank.

And finally, it is almost certainly true that should Congress have to print up literally any amount of money, irrespective of whether that printing of raw money drives oil to $300 a barrel, gasoline to $10 a gallon, and bread to $20 a loaf, in order to prevent the FDIC from being able to pay you with (perhaps worthless) dollars, they will - because they understand full well that the alternative could quite easily be that you reach for a pitchfork - or worse.

But if you believe that having 0.27% of the insured base of deposits as a reserve, having lost more than two thirds of the original reserve due to malfeasance and misfeasance, when not one person has been indicted, prosecuted or imprisoned for their misconduct over the previous two years constitutes "well-capitalized, prudently operated and able to meet insurance obligations".......

... you are free to believe that.

I will however strongly suggest that you investigate the facts for yourself before believing Susie Orman playing "mouthpiece" for a clearly-desperate regulatory apparatus that has allowed the wholesale looting of the American Taxpayer to occur - a regulatory apparatus and government, from the top down that will, it appears, continue to rob you blind until and unless you, the people, demand that it stop.

Disclosure: Short the American people, who appear to be as dumb as a box of rocks for putting up with this crap.

Comments

[moron:]

Good point. The FDIC situation is scary right now if you consider the number of problem banks rose dramatically last quarter and that the FDIC is trying to ignore the fact that the majority of their "problem banks" need to be shut down. Consider that if even half the current problem banks are shut down a significant strain will be put on the FDIC funds. Now, toss in the very real possibility that between worsening credit, rising mortgage defaults, precarious commercial real estate, the teetering dollar, etc and you have the very real possibility of one or multiple "big banks" facing real insolvency issues late this year. Let's be real, Bank of America is probably facing those issues right now, they are just being hidden from us in order so that they can bet it all on a recovery later this year, what happens when that recovery does not come?

Anyway, if any "big banks" fall after the slew of closures that is sure to continue coming of smaller banks the FDIC will not have enough funds to cover. This leaves two equally scary scenarios - a truly massive loan, or temporary nationalization (rendering that bank stock essentially worthless and killing many other banks stocks). Either way, it results in a huge amount of "new money" flooding the market, causing our debt to skyrocket (more than it already has).

The spike in the treasury last week was not a blip on the screen that was resolved later in the week. It is a trend that will continue so long as we toss money at our problems. Instead of facing the facts, and taking our blows, we are trying to ignore reality and fix the problem by rapidly printing as much money as possible. In the process, we are setting ourselves up for years of misery. As the article mentioned, the FDIC's losses have been exacerbated by a refusal to close trouble banks--a stubborn action which steadfastly continues today.

May 31 10:09 AM

[MLKlein:]

Here is a real story of how the FDIC is looking after your tax dollars. I have now seen two cases where real estate developers had loans with a bank that the FDIC seized. In both cases, the developers were in direct negotiations with the FDIC to purchase their notes back for 70 cents on the dollar. Neither were able to close a deal with the FDIC. Instead the FDIC sold the entire portfolio to investors. Now the developers are buying their notes back for 50 cents on the dollar from the entities that bought the portfolios. Rumor is that the FDIC sold the portfolios for 23 cents on the dollar. The remaining funds that the FDIC has will not last very long making deals like the above.

May 31 01:38 PM

[JK Corcoran:]

I closed a loan for a bank that was subsequently taken over by the FDIC. The borrower called me to let me know he would not be able to make payments for a few months due to various factors. I suggested he work with the FDIC receiver to either get forebearance for the three months, or renegotiate and re-amortize the note (both allowed under SBA rules). Instead, the receiver told my customer that he should not worry about making any payments. He would not be putting the note past due, on non-accrual, nor would he default the note even though it is currently over 90 days past due. He told my customer they are packaging up the loans and selling them so he doesn't want to even put the loan on watch status. This appears to me that the FDIC receiver is attempting to not disclose non-accrual loans to potential investors. Boy, my confidence is raised by this...

May 31 02:08 PM

[sarge 907:]

I wonder what currency or metal Barney Frank and Chris Dodd are putting their take from this theift in. Probably not in US treasuries.

May 31 03:30 PM

[ART005:]

When I saw Susie Orman's face light up on Seeking Alpha I thought oh my gosh what looser is refering to that idiot? Well, it wasn't Seeking Alpha, it was the FDIC looking for validation from Orman!! They deserve each other!

Don't forget the other fed agencies lined up waiting for their turn at the U.S. printing press: Private Pension Guarantee, Public Pension Guarantee, Medicaid, Medicare and soon Social Security. Not to mention state gov. financial situations.

The reader comments about FDIC practices is sure enlightening.

Pretty Scary!!

May 31 03:39 PM

[Vegasjoe:]

We are nothing but a banana republic

May 31 06:37 PM

[Karen Consumer:]

"Disclosure: Short the American people, who appear to be as dumb as a box of rocks for putting up with this crap."

Unfortunately, truer words were never spoken.

May 31 11:51 PM

[jaydawg:]

I saw this ad and thought 1984. Enough said!

Jun 13 12:26 AM