Enough with the lies.
Our current FDIC chairwoman, Ms. Sheila Bair, repeatedly insisted FDIC was funded exclusively by the banking industry, only to always accompany her statement with another: that her agency was backed by the full faith and credit of the US government ( another false statement, might I add).
US government meant taxpayers.
With the insurance balance turning negative last month, FDIC now became fully funded by our tax money.
It was tragic enough that the $500 billion FDIC credit line increase recently approved by Congress essentially forced us to compensate for Ms. Bair's incompetence by using our tax dollars to protect our own deposits.
What was even worse was the notion that our tax dollars might be ( if not already was) used to guarantee Ms. Bair's pet projects involving TLGP and PPIP.
FDIC generally explained its decisions and actions starting with " To protect the depositors."
Personally I failed to see how backing billions of bonds for GS and MS protect depositors.
Besides, only idiots would believe in those guarantees and refinancing if FDIC was truly an "independent agency."
Maybe TLGP bondholders should go after Ms. Bair and her " independent agency" if anything were to go wrong with GS or JP Morgan, instead of our $500 billion tax money.
No doubt Ms. Bair has turned FDIC into a colossal AIG.
The only difference was, AIG didn't have unlimited tax money to backstop its recklessness whereas FDIC, did.
Ms. Bair knew this and she has chosen to abuse her power to the maximum.
Take a look at the latest example of bank seizure and sale:
"U.S. regulators blocked the Chinese bank Minsheng from acquiring United Commercial Bank in a deal that could have saved $1.7 billion in taxpayers' money and insurance... The Fed had warned it could not approve Minsheng's application quickly because it was required by law to closely consider Chinese regulatory practices, the newspaper said. The FDIC decided it could not wait before stepping in to protect depositors"
So what criteria was the FDIC using to reach its least cost solution and waste this $1.7 billion? Why did the agency agree, on the hand, to share billions of losses in the earlier sale of Guaranty Bank to a Spanish institution?
"Guaranty Bank, a deeply troubled Texas lender, was sold on Friday to Banco Bilbao Vizcaya Argentaria of Spain in one of the largest government-assisted deals offered to a foreign firm. The government, however, agreed to absorb most of the losses on $9.7 billion, or more than 80 percent, of the Guaranty assets included in the deal."
Similarly, in one of the earliest examples of wealth transfer to the liking of our regulators, FDIC reached the least cost solution, based on the few hours Wamu spent in receivership, by gifting the consumer friendly bank to JP Morgan in a fire-sale.
On the other hand, Wachovia, whose shareholders suffered a one day 90% drop in stock value from the initial $1 per share FDIC-mediated sale to Citigroup, received a far superior offer from Well Fargo when more time was accidentally given ( keep in mind Ms. Bair originally refused to give an interested WFC an extension for due diligence).
So Mr. Frank and Mr. Dodd, go ahead and give FDIC more power.
Let the agency pick and choose which bank to save ( i.e. CIT vs. GMAC)
Let the agency back bank bonds for favored institutions such as GS and JPM so they can hand out billions in bonuses.
Let the agency spend the money it doesn't have.
Let the agency share billions of losses in bank sales.
Let the agency finance deals to overpay for toxic assets.
Let the agency practice "delay and pray" by imposing new rules that "help banks hide commercial real estate losses."
In fact, let's just make Ms. Sheila Bair Queen U.S.A., because she has technically and informally become more powerful than any other government official, including President Obama:
Ms. Bair was able to guarantee and share losses in trillions with a negative fund balance and without going through Congress, but our former Treasury Secretary Mr. Paulson had to beg for his billions of TARP money.
Ms. Bair was able to finance private investors to overpay for toxic assets while receiving praises as a taxpayer advocate, but our current Treasury Secretary Mr. Geithner became the archenemy of the little people with his underhand dealing in the AIG-counterparty resolution.
Ms. Bair was able to gift billions of bonuses to GS and JP Morgan via bond guarantees, wipe out thousands of jobs and bondholders at will, and ignored self-imposed deadlines given to troubled institutions to raise capital or find a buyer and still be given more power via proposed new regulatory reform bills, but President Obama was harshly criticized for his GM bankruptcy intervention and according to the latest poll result, had just suffered a 50% drop in job approval rating.
Forbes was wrong.
Ms. Bair was not the second most powerful woman, she was/is the most powerful person, period.
The truth was, the current financial crisis occurred because of both corrupt banking practices and more importantly, regulatory failure in whch government officials failed to do their jobs:
" At bank after bank, the examiners are discovering that state and federal regulators knew lenders were engaging in hazardous business practices but failed to act until it was too late."
Instead of introducing new regulatory reform bills, our Congress should focus on proper enforcement of regulatory duties.
It was beyond any logical comprehension how every single regulatory agency failed in its supervisory effort, including the Fed, the FDIC, OCC, and OTS.
"' We all could have done a better job,' said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation."
Well, Ms. Bair, the job that you all failed to do cost this country millions of jobs and trillions of investments.
The job you all failed to do almost destroyed our economy.