Global Investing Editor

Coming Soon: Banking Crisis of Historic Proportions

given where I am coming from, as editor of global-investing.comI am astonished at comments about how the failure of U.S. banks is the fault of free trade. US banks got into trouble by making bad loans either directly to the eventual borrower, or more likely, by purchase of cruddy blocks of loans created by Wall St.

The import of foreign goods had nothing to do with this except indirectly by leading to there being too much money available to the banking sector until 2007. Bernanke's excess savings from China is what I mean. Also excess savings in other export areas like the Middle EAst.

The bailouts are federal not state, and the fact that Colonial was in so many places is one reason why. Alabama was not enough. The other is that the FDIC was created in the 1930s by the New Deal to prevent US retail depositors from being wiped out by the failure of the banks which held their money. I cannot imagine anyone so fiercely capitalistic as to want to punish depositors for the stupid loans banks made. Or who wants there to be no safety net for depositors, no FDIC, no Fed, no natioanl currency, no regulators, no government. But these websites seem to attract some weird folks.

What I was trying to say, and I admit it was on the fly, was that because failed banks are usually sold to other banks, the result is to create ever more banks too big to fail. Consolidation with Colonial and other failures has made BB&T a regional superbank. It has to be protected like Citigroup. As a shareholder of BBT I am glad it is protected; as a taxpayer I worry about the impact of further bank disasters.

Who pays for these bank collapses? ultimately everyone with a bank account, because the FDIC has to tax all savings accounts to build up its kitty. That is not a tax as such but indirectly it is one.

Coming Soon: Banking Crisis of Historic Proportions

As a shareholder in BB&T which picked up the pieces in Colonial Bank last Friday with the FDIC; but the State of Alabama was nowhere in the deal, despit what the writer wrote, I think we are in quandary between laudable goals: saving depositors' their deposits which is a national obligation; and saving banks which is not. BBT bought the Colonial accounts in a sharing deal with the FDIC which makes BBT too big to fail. We are creating more and more oligarchic banks which are too big to fail in order to save depositors. which will win? as a BBT shareholder natch I am glad it is now too big to fail. but as a taxpayer I am not so sure