The FDIC Can't Make It Til Payday
Listen, Sheila, I've been there and feel your pain. Did you try shaking out the piggybank? Or trading in your unused DVDs? If that doesn't work, there's always the whole yard sale idea a la California, maybe you can start pawning off all that seized equipment you've gotten over the years? 120 some bank failures since this began should make for a pretty lucrative pot of crap and I hear Ebay is still doing okay, maybe try that?
Acknowledging that they had greatly underestimated the problems plaguing the nation’s banks, federal officials on Tuesday proposed a $45 billion plan financed by the industry to rescue the ailing insurance fund that protects bank depositors.
They also announced that the fund, which had more than $50 billion before the crisis began last year, had been so battered by bank collapses that it would be in the red this week.
The plan proposed by the Federal Deposit Insurance Corporation would, in effect, have the industry lend money to the insurance fund by ordering banks to prepay their annual assessments that would otherwise have been due through 2012.
If adopted, the proposal, the agency’s third restoration plan for the fund in a year, would raise $45 billion from the banks to replenish the fund.
That would almost certainly wipe out the industry’s earnings for this year — in the first half of the year the banking industry reported $1.8 billion in income.
Regulators have told the banks that they will not have to record the prepayments as an expense until the fees would ordinarily have been due, postponing the hit to balance sheets until a time when officials believe the industry will be better able to weather the costs.
Senior officials emphasized that the plight of the fund would have no impact on insurance for bank deposits. Accounts are protected up to $250,000.
With nearly 100 bank failures so far this year, the fund has encountered its greatest crisis since the savings and loan debacle of the 1980s and ’90s. In May, officials projected $70 billion in losses to the fund to rescue failed banks. That estimate was a $5 billion increase from earlier in the year.
On Tuesday the F.D.I.C. increased that estimate by more than 40 percent, to $100 billion in total losses — mostly over this year and next. That would be on top of the nearly $20 billion in losses to the fund last year, when the crisis began and 25 banks failed.
Officials said that as of this week, the fund, which began the year at more than $30 billion and had about $10 billion over the summer, would have a negative net worth.
Well hell, where's that loan shark Bernanke when we need him?
I smell a rat. This is what will wipe out bank earnings? While it's sheisty to say the least (whatever happened to that $500 billion line of credit from the Treasury? Or are we having a little trouble unloading our worthless paper these days?), two things to keep in mind on bank "earnings" in the first two quarters of 2009: A) they were always made up thanks to FASB's black magic accounting voodoo and B) it doesn't take a financial genius to understand that surging unemployment + continued economic contraction = defaults up the ass. What's complicated about that equation?
Jr Deputy Accountant's humble suggestion is to pull your money while it's still worth something before you start getting assraped by the banks to cover the additional fees. What, you didn't think they were going to pony this shit up themselves, did you?
Though I'm the incendiary type, I would never ever suggest something like a coordinated, calculated nationwide bank run where we all pull our loot at once but were something like to happen, I'd certainly be the one LOLing all the way to the bank - simply because I don't use them. You can do it and surprisingly, it's really not all that difficult.
Take back your economic freedom or keep getting terrorized by these asshats, your choice. But if you're at the back of the bank run line crying, I will be happy to say I told you so. Just sayin.