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.
Isn’t it their losses that would leave them short of working capital?
Ohio Fraudclosure
Mish's Global Economic Analysis
Northern Virginia Housing Bubble Fallout
UK House Bubble
Bubble Meter
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
twist -
Maybe it’s better than last time because the authorities are panicking earlier in the cycle
“FDIC’s list of ‘problem’ institutions grows 30 percent, reaches highest level in 5 years”, by Patricia Sabatini, Pittsburgh Post-Gazette, August 27, 2008.
The FDIC has always been 100% backstopped by the Feds. The “borrowing” is an accounting method to make it appear that the bank funded FDIC is not really being bailed out. Banks may be charged more in the future to make it up and pay back the difference. However, failure of the FDIC is not an option.
“The mainstream banks are, by and large, in pretty good shape.”
What kind of crap is that? Does this consultant have eyes or ears?
igor’s word – broke. That’s right! BROKE
Sounds like its time to blame the bloggers again isn’t it Sheila?
How bad is this going to get?? Does anybody have any idea?
Builders need to stand together and “push back” on the banks.
http://www.operationpushback.com
twist,
Did you read this article on cnnmoney? http://money.cnn.com/2008/08/28/news/companies/fdic_banks/index.htm?postversion=2008082813
“Since the failure of IndyMac in mid-July, however, speculation has emerged that regulators may have exercised some discretion about which institutions they put on the confidential list.
The FDIC’s first-quarter problem list, released at the end of May, clearly did not have IndyMac on it. That’s because the FDIC reported that the 90 banks on the list had a combined $26.3 billion in assets – less than the size of IndyMac. That suggested that the only problem banks at the time were smaller community banks.
Experts say that if IndyMac had been on the list, the total asset size of troubled banks would have been much higher. That might have prompted a witch hunt of sorts, with the market looking for which bank was in trouble and possibly causing a run on that institution.
“It is kind of the issue of the snake swallowing the watermelon,” said Bert Ely, an Alexandria, Va.-based banking industry consultant of Ely & Co. “I can assure you if IndyMac had been on the list in late May, there would have been an immediate hunt.”
Others pointed out that bank failures, as a rule, don’t happen to be overnight phenomena.
Tim Yeager, a professor of finance at the University of Arkansas’ Walton College of Business who previously worked for the Federal Reserve Bank of St. Louis, said regulators probably knew about the state of IndyMac for some time even though it wasn’t on the first-quarter problem list.
“It is telling that IndyMac was not on the problem list the quarter before,” said Yeager. “Usually bank failures like that are pretty slow events – it is unlikely [federal regulators] were surprised by that.”
The OTS, IndyMac’s primary regulator, has maintained that it was aware of the company’s problems, but was in the midst of an examination of the lender that did not wrap up until after the first quarter was over. At that point, IndyMac was placed on the list.”
So, apparently the FDIC list will only have small community banks & the large bank you have your accounts in very well could “selectively” be added to the list only after it’s already released to the press & right before they step in to take it over.
igor’s word – shady
Two Ameros for the day:
Bank failures are predicated upon regulation enforcement, mark-to-market values, and withdrawals. Without trying to sound too much like George Bailey, systemic bank failure might be avoided over time by a combination of those three items. I don’t think there’s any question that assets don’t equal liabilities right now, but if there is no stampede by either the public (to withdraw assets) or the government (to enforce regulations and/or mark-to-market), the amount of Treasury/Taxpayer money that has to get involved can be minimized. To me, that’s what the government tea leaves look like with regard to F&F as well.
Also factoring in on the current banking environment is the notion of housing prices needing to stabilize before the economy can recover. If there is a “New RTC” or if FDIC gets into the real estate business by taking over the servicing of mortgage assets it acquires… well, RTC Mk.1 led to MASSIVE liquidation of real estate at (ostensibly) below-market prices. I think Congress and the (new) White House both understand that a liquidation of real estate by the FDIC or RTC Mk.2 would be counterproductive to the economy (or at least anybody’s reelection prospects), so I think they are extremely loath to get the system flushed out. Personally, I would volunteer to be the guy to push the flusher.