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Barney Goes Retail While FDIC Goes Kookoo Worrying About Banks Making Safest Loans

Wow, who could have seen this one coming?

Mr. Frank attempted to score a big one for Main Street over Goldman Sachs:

"Frank is trying to generate support for a Congressional bill that would allow only retail banks with a lending function to have Fed discount window access."
www.zerohedge.com/article/barney-about-s...


Way to go Barney!

Unfortunately, the same could not be said about his buddy Ms. Bair over there at the FDIC, as she continued to make bizzare and absurd public statements, enthralling her critics:

"Federal Deposit Insurance Corp. Chairman Sheila Bair said she’s “concerned” that U.S. banks are making only the safest loans, and encouraged the companies to step up their pace of lending.

“There needs to be well-managed risk-raking to get the economy going again,” Bair said today in a Bloomberg Television interview at the White House, prior to a meeting of bank chief executive officers with President Barack Obama."
www.bloomberg.com/apps/news?pid=20601087...


Huh?

Well, that was a short article.

Guess Bloomberg was just as shocked as I was...

Of course this news was followed by another dumbfounding piece of information about our regulators:

"While publicly badgering banks to lend more to boost the economy, regulators are pressuring them to be cautious in evaluating existing loans and making it extremely hard to start new banks."
www.istockanalyst.com/article/viewiStock...


Can someone please tell me what is FDIC's official stand on lending?  Does Ms. Bair want to help prolong, or solve, the credit crisis?  Why does she keep on taking actions that contradict her statements?

First Ms. Bair exacerbated the credit crunch by seizing Wamu based on liquidity pressure.  Banks started hoarding cash and refused to lend to even each other.

Next, she tried to create liquidity to encourage lending via TLGP, but since she forgot to place any limitation on the capital raised, banks used the money to pay back TARP and for bonus instead.

Then there was her failure in following PCA, which hurt lending even more when no buyer could be found for insolvent banks, i.e. New Frontier Bank and loss of loan servicing to Colorado farmers:

"'Prompt Corrective Action' is a US federal law mandating progressive penalties against banks that exhibit progressively deteriorating capital ratios. At the lower extreme, a critically-undercapitalized FDIC-regulated institution (i.e., one with a ratio of total capital / assets below 2%) is required to be taken into receivership by the FDIC in order to minimize long-term losses to the FDIC."
en.wikipedia.org/wiki/Prompt_Corrective_...

By the way, collecting 3-year prepayments from healthy banks, who played no part in causing the current economic meltdown and who have actually been doing loan servicing to consumers and small business owners, to cover for the negative balance mess at the FDIC was not going to encourage more lending!

Why should others pay for FDIC's missteps and lack of foresight, including negligency in supervision and inadequate funding because it underestimated the severity of the current financial crisis?


*imho*