"Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative."
"Alex Pollack, a fellow at the American Enterprise Institute... pointed to the failures of the Federal Deposit Insurance Corporation (FDIC), 'a relatively simple banking regulator' as indicative that the establishment of a SSR with a far more extensive remit will inevitably fail in its mission to minimise systemic risk.
'The FDIC is hardly an impressive model at the moment. It is insolvent; its liabilities are greater than its assets and its net worth is negative. It is in the process of putting after-the-fact special assessments on banks at the worst time, when the banks are struggling, tipping the US banking system into an aggregate loss in the second quarter of 2009. In addition, depending on the forecast you consult, we're looking at another 500 to 1,000 bank failures, which hardly supports the success of banking regulation or the FDIC's ability to anticipate the losses or the trends in the market'"
"The FDIC's Office of Inspector General analyzed 23 lenders taken over by regulators... [and] found that for 20, the agency's examiners didn't identify the issue early enough or should have taken stronger supervisory action..."
So how did the regulators decide to solve this problem?
"Banks Get New Rules on Property"
In other words,
" Banks Can Lie About Commercial Real Estate Loans... Instead of having to foreclose and take writeoffs, the new rules encourage banks to modify existing commercial real-estate loans, even when the value of the asset has fallen below the value of the loan"
No wonder Bair preferred "keeping Inspector General Reviews Private."
It was unfortunate that she often attempted to save her agency at the expense of “ the others.” Her latest answer to FDIC’s insolvency was a 3-year prepayment, a move that would no doubt hurt healthy and responsible banks and further endanger the limited amount of credit lines for business owners.
She then practically destroyed the bond market when she decided to wipe out Wamu bondholders.
"By its unwillingness to liquidate WaMu now, a move that might have salvaged something for bond investors, the FDIC potentially could have set up further problems down the road. If investors are unwilling to risk investments in floundering financial institutions, additional bank failures could follow. The losses to the insurance fund potentially could be even greater"
This unprecedented action immediately tanked Wachovia and dealt a near-fatal blow to our already fragile economic state, because it cut off the most important source of funding for not only financial institutions but also companies across all sectors.
Without a single word of apology or explanation for this catastrophic misstep, she launched and took credit for the bond guarantee program TLGP.
Amazingly, although Bair continued to make statements to please the general public and in direct contrast to her actions, her popularity remained strong with the mainstream media.
"FDIC Bair: Suspend some Wall St. bonuses"
Why didn't the article include this important piece of information?
Because she failed to impose any restriction on the capital raised from these FDIC-backed bonds, the few elite beneficiaries ended up using the money to engage in risky bets and to devour their rivals. As banks grew bigger, they began to monopolize their markets.
Despite all that, we, as responsible and law-abiding citizens, obediently continued to pay higher banks fees and credit card interest rates that were slapped onto us by the very same banks we saved with our tax dollars.
"Bair says Secured Creditors Should Pay For Failures"
Brilliant logic here, wouldn't you say?
I thought deposit protection was FDIC’s top priority.
How could it not be a serious ethical concern when FDIC could influence rating agency because it was unhappy with the bank management, especially when Bair originally deemed Citigroup strong enough to "rescue" Wachovia merely weeks before C received a huge government bailout? Where was the accountability?
"Bair Wants to Shake Up Management, Sought to Cut Ratings of Bank's Health"
I am going to side track a bit and dabble in some conspiracy theory. Was Wachovia allowed to fail so it could be used to save Citigroup? We could assume our regulators knew (because anyone with any common sense would) that by wiping out Wamu bondholders, Wachovia would fall almost immediately due to soaring insurance costs. By refusing to help Wachovia stay independent and giving other banks barely any time to do due diligence on a potential deal, FDIC could simply gift Wachovia to Citigroup without any question asked, even appearing chivalrous.
OK. Back to topic. Recently, the manangement even received positive reviews by the very same consulting firm approved by the FDIC.
When everyone was angry about the AIG bonus in March, Congress was writing up (originally named the Depositor Protection Act of 2009) to give FDIC up $500 billion. Not that many people noticed the mess she had created with order of payments in the Wamu seizure either.
Speaking of Wamu, our Congress was now considering a “legislation [that] would permit the government to impose tough new capital requirements on the largest companies as well as take them over, making their shares virtually worthless, and remove management when they fail. It would also provide new authority for the FDIC, which seizes weak commercial banks, to take over other large financial institutions like insurance companies or hedge funds, when they run into trouble.”
Our Founding Fathers believed in the checks and balances of power. This was the reason for the creation of the Judicial Branch. Washington Mutual Holding, JP Morgan, and FDIC have been fighting over about $4 billion in deposit at Wamu. Without the bankruptcy court, we would not have found out that FDIC seized a well-capitalized and solvent Wamu, or that WMBfsb, with allegedly $17 billion in cash, was also declared a failure and then seized and sold to JP Morgan in the same fire-sale. Even more interesting, unlike Lehman's auction that priced its bonds at 8.625 cents, Wamu's were actually valued at 57 cents.
“Attorneys for JPMorgan and the FDIC argued Thursday that a full evidentiary record and trial are needed before the court can determine the rightful owner of the assets… JPMorgan has suggested that the money was included in the assets sold to it by the FDIC, and that WMI's transfer of $3.67 billion from WaMu to WaMu fsb, a subsidiary, was a capital contribution, not a deposit transfer, and thus belongs to JPMorgan”
"The downfall of Washington Mutual"
"A Fall to Remember: An Inside Look at Wachovia's Last Days"
Dear America, it is time to realize that if FDIC wants your bank to fail, it can make it happen while looking like a hero. So the question is, are you not going to demand accountability until your savings and investments are taken away, all in the name of deposit protection, taxpayer interests, and systemic risk prevention?