The FDIC Is (Still) Broke
Guess who is on the receiving end?
Hint: it isn't JP Morgan
In November of 2009 I wrote about Sheila Bair whining that her job made her do a lot of things that made her feel like a dirty non-Republican. Whine and cry, I don't necessarily feel bad for her as she certainly knew what she was getting into when she agreed to the gig.
Anyway, here's what she said then:
A top U.S. bank regulator struck out against the portions of the financial industry that are fighting reforms, saying they are using fear tactics.Western Rifle Shooters Association reminds us that the FDIC is still broke, unless -$15.2 billion suddenly means a "corporation" (that's what the C in FDIC supposedly stands for, in much the same way as the Federal in Federal Reserve means they're actually a legit arm of the government) is solvent. How is the FDIC auctioning off banks' shit when they can't even pay their own bills? If they're a government institution, they allegedly owe us as "shareholders" since they're supposed to exist to "protect" our interests no? So at what point do we throw out the board and get our fucking dividends? This -$15.2 billion shit isn't going to work.
Sheila Bair, chairman of the Federal Deposit Insurance Corp, said on Monday that some in the financial services sector are trying to argue that regulatory reform would stifle innovation and impede economic growth.
"That makes me angry," Bair said in a text of remarks prepared for a lecture at Kansas State University.
Bair said the extreme market interventions that have occurred during the recent financial crisis have been difficult for her as a life-long Republican and market advocate.
But she said they were necessary and that government needs even more tools to discourage financial firms from getting so large that taxpayers are forced to provide assistance if the firms become unstable.
"The government has been going into places where we don't want to be," Bair said, but she added: "We simply cannot afford to maintain the status quo."
From page 13 of the FDIC's latest Quarterly Banking Profile:In September of 2009, Sheila Bair was trying to come up with creative ways around this little pending negative balance problem without using the $500 billion line of credit she got from Treasury. Where they thought they would get it from is anyone's guess.
...The Deposit Insurance Fund (DIF) increased by $5.5 billion during the second quarter to -$15.2 billion (unaudited). The increased amount included $3.2 billion from accrued assessment income, $2.6 billion from a decrease in provisions for insurance losses, and $119 million from interest on securities and other revenue. Unrealized losses on available-for-sale securities combined with operating expenses reduced the fund by $443 million...
Ms. Bair appeared cautious about resorting to the Treasury credit line, saying there are different views on when it should be used. She said some believe it should be reserved for emergencies only, rather than for covering losses that are already known.I am not sure why WRSA is confused, coming from an accounting background, as it's fairly obvious that -$15.2 billion is really just an entry in someone's books, reverse in someone else's. It's only a series of blips and not an actual hole $15.2 billion deep that can't be smudged away somehow. At least that's what I would assume they could do as a last resort, I don't quite understand who the FDIC would owe $15.2 billion to. The bigger banks buying the little banks the FDIC is chewing up one after the other? How can insurance be negative in the first place?
Congress acted earlier this year to allow the FDIC to borrow as much as $500 billion from the Treasury if the Treasury, the Federal Reserve and the White House believe it is warranted. Otherwise, the agency can borrow up to $100 billion.
The financial crisis has clobbered the FDIC's deposit insurance fund, forcing the agency to impose a special assessment on the industry to rebuild the fund. Ninety-two banks have failed so far this year. The deposit insurance fund fell by $2.6 billion to $10.4 billion during the second quarter, after 24 banks went bust.
Maybe the FDIC can go collect their $800 from this guy.
As feared, financial "reform" did everything but and made the "temporary" $250,000 "insurance" both forever and retroactive to the idiots who had their money in IndyMac and a few other bank failures previous to its enactment in 2008.
See also: Barry Ritholtz via The Big Picture FDIC Running Out of Cash (August 2009)