Introduction – The FDIC is a private corporations licensed by the US government to insure the banks and savings and loans of the USA. The SIPC is the Securities Investor Protection Corporation. This is a private corporation designed to insure investors who have invested with stockbrokers who have failed or gone bankrupt. It too is a private corporation that can fail or go bankrupt. The point here is these are private corporations specifically chartered by the US government to insure these institutions. If the bank losses are too great and exceed the reserves these companies have then who knows what happens for sure. Best to think doom and gloom.
Recent Scenario – The FDIC reserve fund is currently at $50 Billion. The FDIC fund is currently set at $53 Billion. This fund is about as tangible as the social security trust fund. On March 31, 2008 the reserve fund was valued at $52.843 billion USD, or 1.19% of the insured deposits. Deposits are insured only to $100,000. If a person have $400,000 in one bank account only $100,000 of it would be insured. The FDIC must have a minimum of 1.15% on hand. The recent failure of IndyMac is estimated to cost the fund 4 billion dollars. This is going to drop the fund below the 1.15 level. This may force the government to make changes in the fund, or not?
Analysis – There have been 14 bank failures in 2008 alone. To see the list and read the financials go here:
FDIC warns US bank deposit insurance fund could tank AFP/Getty Images/File – The US government is warning banks that its deposit insurance fund could go broke this year as bank failures …
WASHINGTON (AFP) – The US government is warning banks that its deposit insurance fund could go broke this year as bank failures mount.
The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC’s plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.
Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protect.
“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote.
Former chief economist of the International Monetary Fund (IMF), MIT Sloan School of Management professor and senior fellow at the Peterson Institute for International Economics, Simon Johnson examines President Obama’s plan for economic recovery.
Bill Moyers: Welcome to the Journal.
The battle is joined as they say – and here’s the headline that framed it: “High Noon: Geithner v. The American Oligarchs.” The headline is in one of the most informative new sites in the blogosphere called: baselinescenario.com. Here’s the quote that grabbed me:
“There comes a time in every economic crisis, or more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that – they say – will deliver you back to growth. The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains. Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble?”
And here’s the man who asked that question. Simon Johnson is former chief economist at the International Monetary Fund. He now teaches global economics and management at MIT’s Sloan School of Management and is a senior fellow of the Peterson Institute. He is co-founder of that website I quoted – baselinescenario.com – where he analyzes the global economic and financial crisis.
Welcome, Simon Johnson to the Journal.
Simon Johnson: Nice to be here.
Bill Moyers: What are you signaling with that headline, “Geithner vs. the American Oligarchs”?
Simon Johnson: I think I’m signaling something a little bit shocking to Americans, and to myself, actually. Which is the situation we find ourselves in at this moment, this week, is very strongly reminiscent of the situations we’ve seen many times in other places.
But they’re places we don’t like to think of ourselves as being similar to. They’re emerging markets. It’s Russia or Indonesia or a Thailand type situation, or Korea. That’s not comfortable. America is different. America is special. America is rich. And, yet, we’ve somehow find ourselves in the grip of the same sort of crisis and the same sort of oligarchs.
The prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition,” reported the New York Times last Friday.
Wow! The entire country is steamed up over the Republicans bailing out a bunch of financial crooks who have paid themselves fortunes in bonuses for destroying America’s pensions.
Why do Democrats want to protect Republicans from further ignominy by not giving them the opportunity to vote down a bailout for workers? Quick, someone enroll the Democratic Party in Politics 101.
GM’s divisions in Canada and Germany are asking those governments for help. It will be something if Canada and Germany come through for the American automaker and the American government doesn’t.
Conservative talking heads are saying GM is a “failed business model” unworthy of a $25 billion bailout. These are the same talking heads who favored pouring $700 billion into a failed financial model.