Tuesday, September 29, 2009

Guest Post: Max Headroom Brings The Rage To The FDIC

As your source for all things FDIC, we bring you a guest post from long time friend of TILB - Max Headroom - on the ongoing debacle that is the public "option" for deposit insurance. Don't worry though, we are sure a health care public option would be far sounder and less costly. The public options in mortgages (Fannie and Freddie) and deposit insurance (FDIC) are probably the outliers. Something as simple as healthcare (i.e., 16% of GDP and with all sorts of personal and moral decisions) would likely be much simpler.

In any case, Max brings the anger on the news the FDIC is going to borrow $45 billion from the banking system to support the banking system and that it expects to incur $100 billion of insured losses before all is said and done. Enjoy:
I can’t believe this isn’t getting more press. But I’ve been saying this for about 12 months now; finally the FDIC admits that it is a full-on insolvent sh!t show. It just ramped its loss estimates to $100 bn from merely $70 bn – that’s nearly an increase of 50% mind you – and says it will “go negative” this month (never mind the massive liabilities it has taken on and guaranteed too). So it officially has no money; actually, it officially has negative money.

But this is the shocker - to pay for this debacle, i.e. to do its job and protect depositors, Sheila is recommending that banks pay in advance 3 years of insurance premiums totaling $45 billion. What would you do if Allstate called you up and told you to pay 3 years of auto premiums in advance? An appropriate “go eff yourself” would no doubt be the response.

So while our “healthy” banks – which is hard for me to say with a straight face – continue to struggle (though not lend, i.e. do their job), our gubbernment chooses to further hinder their return to solvency (and hence lending) by placing this new $45 billion burden upon them. Keep in mind, this is direct thievery from the banks’ shareholders and can be seen as a penalty for prudence (or more correctly for being less insolvent).

“I do think this is a good balance,” Chairman Sheila Bair told reporters, and requires the industry to “step up” to spread the financial hit to banks (socialism, there, I said it).

Really, Sheila? You think that “stepping up” and stealing $45 billion from Americans to pay for your incompetency is “a good balance”? I recommend you “step down”, Sheila. You are a colossal failure of the largest proportions, only rivaled by AIG, US fiscal policy, and the Fed’s monetary policy. You are the Queen Joke of regulation in a time when it is really hard to be one because you are surrounded by so many regulatory jesters. Thanks, Sheila, for doing your part to destroy America.
Preach it M-M-M-Max.