Bank Armageddon: The FDIC is Strapped for Cash

Zarathustra · 09-15-2008, 05:40 PM

http://loanworkout.org/2008/09/bank-...pped-for-cash/

About the Author

Moe Bedard is a leading expert and trusted authority in regards to loan workouts and loan modifications. Moe is the founder and President of Loan Safe Solutions, LoanSafe.org and the main contributor to LoanWorkout.org. He has blogged on this subject more than any other person on earth and has personally been involved in over 300 loan workouts and mortgage audits.

Bank Armageddon: The FDIC is Strapped for Cash
By Moe Bedard on September 15th, 2008

The Federal Deposit Insurance Corp (FDIC) looks to be strapped for cash. Just like the banks and the American people for which their cash, they protect. It looks like they’re following in the footsteps of Bear Stearns, Freddie and Fannie because now the FDIC may seek to borrow money from the Treasury Department AKA the American People, to see it through the inevitable tsunami of bank failures that are coming to a bank near you.

One doesn’t have to look far to see what bank failures can do to what they call “depositors”, also known as, people, who put their money in the bank. Do you think ALL your money is safe is a FDIC insured banking institution? Think again.

Let’s take a look back in the recent bank failure past at Fran Sweet, a depositor in the failed Superior Bank of Chicago ran by the billionaire family, the Pritzkers. I wrote about the Superior Bank failure back in March. Barack Obama was in Chicago at the time of the Superior Bank failure & has full knowledge of what went on and the cause of the collapse.

Meanwhile, roughly 1,000 depositors who had deposits above $100,000 in a Superior account—money above the FDIC-insured limit—lost about $65 million. Most of them were middle-class individuals, attracted by Superior’s high interest rates. [Ed. note: it is presence of FDIC itself that allows unsound banks to offer high interest rates like this.] In the three months just before the bank was closed, there was a surge of $9.6 million in uninsured deposits. Since about 54 percent of the uninsured money has since been repaid as Superior was sold off, the depositors have still collectively lost about $30 million. (That just happens to be the amount that the Pritzkers gave to the University of Chicago’s Pritzker School of Medicine earlier this year.)

Some of that money could have paid back Fran Sweet for the roughly $138,000 that she has still not recovered from her deposits at Superior. After retiring as a manager at a telecommunications company, Sweet was seeking a secure place to put her entire retirement savings of about $500,000. “I knew the Pritzkers were owners of the bank,” she says, “and they were a reputable name in Chicago. I had no idea that the bank was in trouble.”

Fran sweet as yet to receive all the money she deposited in the failed bank. 7 years later and she is still trying to seek justice and most of all, her money.

Wall Street Journal:

“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.

Bair said such a scenario was unlikely in the “near term.” With a rise in the number of troubled banks, the FDIC’s Deposit Insurance Fund used to repay insured deposits at failed banks has been drained. It appears that Ms. Bair is sending us signals of an impending reality that WILL come like she has in the past in regards to the adjustable rate and Alt A mortgages that are wreaking havoc on borrowers everywhere.

A woman unafraid to speak the truth, Sheila Bair has been one of the most pro consumer, pro loan modification and anti foreclosure advocates that heads any government agency to date. It has been obvious from my research over the last 18 months that Ms. Bair is obviously the most educated, experienced and has the most common sense when it comes to dealing with the crisis at hand.

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

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

In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.

The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.

The last time the FDIC had borrowed cash from the Treasury was during the savings and loan crisis in the early 1990s after thousands of banks were shot down.

This time, this crisis, will be worse, much worse……………………………………..

FrostyMcunicron · 09-15-2008, 06:11 PM

what if no one wants them to tap into the public's pocket?

Zarathustra · 09-15-2008, 06:16 PM

Then, when the bank goes under, the depositors lose all of their money held in those accounts.

09-15-2008, 05:40 PM	#1
Zarathustra Avalon Senior Member Join Date: Sep 2008 Location: Eastern U.S. Posts: 429	Bank Armageddon: The FDIC is Strapped for Cash http://loanworkout.org/2008/09/bank-...pped-for-cash/ About the Author Moe Bedard is a leading expert and trusted authority in regards to loan workouts and loan modifications. Moe is the founder and President of Loan Safe Solutions, LoanSafe.org and the main contributor to LoanWorkout.org. He has blogged on this subject more than any other person on earth and has personally been involved in over 300 loan workouts and mortgage audits. Bank Armageddon: The FDIC is Strapped for Cash By Moe Bedard on September 15th, 2008 The Federal Deposit Insurance Corp (FDIC) looks to be strapped for cash. Just like the banks and the American people for which their cash, they protect. It looks like they’re following in the footsteps of Bear Stearns, Freddie and Fannie because now the FDIC may seek to borrow money from the Treasury Department AKA the American People, to see it through the inevitable tsunami of bank failures that are coming to a bank near you. One doesn’t have to look far to see what bank failures can do to what they call “depositors”, also known as, people, who put their money in the bank. Do you think ALL your money is safe is a FDIC insured banking institution? Think again. Let’s take a look back in the recent bank failure past at Fran Sweet, a depositor in the failed Superior Bank of Chicago ran by the billionaire family, the Pritzkers. I wrote about the Superior Bank failure back in March. Barack Obama was in Chicago at the time of the Superior Bank failure & has full knowledge of what went on and the cause of the collapse. Meanwhile, roughly 1,000 depositors who had deposits above $100,000 in a Superior account—money above the FDIC-insured limit—lost about $65 million. Most of them were middle-class individuals, attracted by Superior’s high interest rates. [Ed. note: it is presence of FDIC itself that allows unsound banks to offer high interest rates like this.] In the three months just before the bank was closed, there was a surge of $9.6 million in uninsured deposits. Since about 54 percent of the uninsured money has since been repaid as Superior was sold off, the depositors have still collectively lost about $30 million. (That just happens to be the amount that the Pritzkers gave to the University of Chicago’s Pritzker School of Medicine earlier this year.) Some of that money could have paid back Fran Sweet for the roughly $138,000 that she has still not recovered from her deposits at Superior. After retiring as a manager at a telecommunications company, Sweet was seeking a secure place to put her entire retirement savings of about $500,000. “I knew the Pritzkers were owners of the bank,” she says, “and they were a reputable name in Chicago. I had no idea that the bank was in trouble.” Fran sweet as yet to receive all the money she deposited in the failed bank. 7 years later and she is still trying to seek justice and most of all, her money. Wall Street Journal: “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. Bair said such a scenario was unlikely in the “near term.” With a rise in the number of troubled banks, the FDIC’s Deposit Insurance Fund used to repay insured deposits at failed banks has been drained. It appears that Ms. Bair is sending us signals of an impending reality that WILL come like she has in the past in regards to the adjustable rate and Alt A mortgages that are wreaking havoc on borrowers everywhere. A woman unafraid to speak the truth, Sheila Bair has been one of the most pro consumer, pro loan modification and anti foreclosure advocates that heads any government agency to date. It has been obvious from my research over the last 18 months that Ms. Bair is obviously the most educated, experienced and has the most common sense when it comes to dealing with the crisis at hand. The borrowing from the Treasury could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the WSJ said. The borrowed money would be repaid once the assets of that failed bank are sold. In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry. The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said. The last time the FDIC had borrowed cash from the Treasury was during the savings and loan crisis in the early 1990s after thousands of banks were shot down. This time, this crisis, will be worse, much worse……………………………………..

09-15-2008, 06:11 PM	#2
FrostyMcunicron Avalon Senior Member Join Date: Sep 2008 Location: a box in the inner city w. a slight chance of suburbia New Jersey Posts: 160	Re: Bank Armageddon: The FDIC is Strapped for Cash what if no one wants them to tap into the public's pocket?

09-15-2008, 06:16 PM	#3
Zarathustra Avalon Senior Member Join Date: Sep 2008 Location: Eastern U.S. Posts: 429	Re: Bank Armageddon: The FDIC is Strapped for Cash Then, when the bank goes under, the depositors lose all of their money held in those accounts.