August 27, 2008

And then, right on schedule, the FDIC ran out of money and became insolvent (no matter how they try to spin it)


Ponzi.

Scheme.

And then the music ended.

The bankers made their bonuses, had their parties, lived their lavish lifestyles. And the US taxpayer picked up the tab.

FDIC may borrow money from Treasury

Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.

The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.

The borrowed money would be repaid once the assets of that failed bank are sold.

"I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper.

21 comments:

Anonymous said...

so if we can pay for a house with cash should we? It would kinda suck having no house and no bank accounts left.

Opinions?

Paul E. Math said...

Don't keep more than $100k with any 1 institution. Spread it around.

Yes, the FDIC will need a bailout. No, it will not be just to resolve 'short-term cash flow' issues.

The FDIC is as insolvent as fannie and freddie. More of your taxpayer money going to support a bloated parasitic financial system.

We jumped from 90 institutions on their watch list to 117 in 1 quarter. And you can bet that some of those institutions are whoppers.

Not to hijack, but how is this not inflationary? How do we get deflation when the Fed keeps rates low and the Treasury keeps giving money away for nothing?

christiangustafson said...

Lighten up, Francis.

Corus will give you 4.75% on a 12 month CD!

Party!

Anonymous said...

Sharpen the pitchforks and bring a rope. We have work to do, and a LOT of it.

Start at the very top and work quickly down.

Desperate times call for desperate measures...

You could do the entire executive branch in a morning....

Anonymous said...

buy gold?

Kevin said...

Paul: I think much of the confusion on inflation/deflation is simply which definition people are using.

Commonly we refer to inflation as an increase in prices and deflation as falling prices. However, economists in the "Austrian" camp define inflation as an increase in the availability of money and credit and deflation as the opposite.

Since a greater supply of money/credit makes money/credit less valuable, prices rise and the two definitions correspond. If money/credit gets restricted, then it becomes more valuable and prices fall.

However you CAN have scenarios where there is a disconnect between the two, at least when looked at from certain angles. That seems to be what's happening now.

Credit has tightened immensely. Concurrently, house prices have plummeted. However, we've also seen demand-driven increases in the price of energy and food. Where the overall change has gone at this point is a bit hard to say. We've already seen one to several trillion dollars worth of real estate valuation evaporate -- that's DEFLATIONARY. Oil and food are up substantially -- that's inflationary (pricewise, again). On balance, therefore, are prices inflationary or deflationary?

So, money-wise we're in a deflationary period. Price-wise? Not so clear.

Stuck in So Pa said...

All it's going to take is that one "biggie" they keep talking about to go down and take everything with it, country, economy, and financial system. The FDIC doesn't stand a chance.

On a brighter note, nothing times anything is still nothing? Those hundreds of billons in banker bonuses will be worth ZIP when the dollar disappears. My bank account goes bye-byes too, but at least I have acquired several useful skills over the years, so the odds for my survival are a little better.

You can't outsource services to India, and China, nor can you import their cheap goods, when you have NO money to pay for them.

Veronica Lodge said...

RE: FDIC going broke...

"The borrowed money would be repaid once the assets of that failed bank are sold."

The failed banks will have no assets.

That's why they went broke!

V.L.

Anonymous said...

Keep in mind it didn't see the ones that already collapsed, so what else are they missing?

k.w. - Southern Ca. said...

Well, the house was never a home debter's property (with all that negative equity), and they were using money that was never theirs in the first place - living lavishly in many cases.

So ... now many people are back (actually below) "0", worse off than before.

As a home owner, I'm amazed at just how many people pushed their way into (over speculated) homes these past few years that they just couldn't afford - just to "keep up" with their friends.

The whole thing just doesn't make any sense, and that's why we're seeing the natural forces of the market take control now and equalize all this craziness - unfortunately with alot of pain to many folks who haven't a clue as to how bad this will get in the coming months/years ahead.

Anonymous said...
so if we can pay for a house with cash should we? It would kinda suck having no house and no bank accounts left.

Opinions?

Devestment said...

Remember, its FIAT currency.

The debt can be wiped out with a keystroke.

The real problem will arise if America is perceived as weak and our currency looses credibility.

Try defending that without WMD's and armed citizens.

Devestment said...

so if we can pay for a house with cash should we? It would kinda suck having no house and no bank accounts left

how will you pay your property taxes?

Anonymous said...

BUY GOLD. BUY SILVER. DO IT NOW. The Plunge Protection Team took the metals down because they knew this crap was going to hit the fan. The dollar, for now, has the help of the Europeans and the Chinese. They are SUBSIDIZING A CHEAPER BUY PRICE FOR NOW, WHILE EVERYONE IS FOOLED AND SCARED.

Gold works well in inflation and deflation!

Apmex.com
Monex.com
BullionDirect.com

gutless and lazy sharpening the sword said...

So when do we get to hang and leave twisting in the wind the worst of the real estate brokers, the mortgage brokers, the CEO bankers originating loans, the Wall St. Einsteins that came up with CDOS and 'traunches" and the Wall St. house CEOs that are perveyors of debt instruments?

I WANT A HIGH BODY COUNT ON THESE TYPES! NOW!!!!

The Tim said...

From the Seattle-area satire paper The Naked Loon: FDIC Folds

P.S. (I write The Naked Loon)

Anonymous said...

.....but how is this not inflationary? How do we get deflation when the Fed keeps rates low and the Treasury keeps giving money away for nothing?
-----------------------------------
Actually, that answer is very simple. Bad Credits/debts are going to fiat heaven faster than the Central Banks can replace them.

SeattleMoose said...

The majority of players in the financial sector are parasites on the actual economy....

Lady Di said...

Paul E. Math wrote:

"Not to hijack, but how is this not inflationary? How do we get deflation when the Fed keeps rates low and the Treasury keeps giving money away for nothing?"

-----------------------------------

I've yet to hear from any "expert" what all this deflation plus the massive amount of money given away by the Fed means in a couple years from now when all this settles in.

It's easy to talk about deflation, inflation, liquidity, blah, blah, blah, but the king in my book is the one that can give me an endgame analysis right now. Where is this person? My kids' college funds are at stake here.

shtove said...

Well, isn't that just hilarious. Not.

And this disaster is only just beginning. Someone got their sums baaadly wrong.

p.s. Kevin - as far as I know, credit is still expanding, despite the housing bust.

Anonymous said...

Remember IndyMac — the biggest bust this year — wasn’t even on the list.

credit surfeit said...

RE: The failed banks will have no assets...

V.L. is spot on.