Words fail me

Written By: - Date published: 11:49 am, March 13th, 2009 - 8 comments
Categories: International, scoundrels - Tags:

FDIC Balance and failed banks

A link in the comments led me to ballon juice You Have To Be Shitting Me. It refers to a article at boston.com Now-needy FDIC collected little in premiums

WASHINGTON – The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized – and that bank failures were so infrequent – that there was no need to collect the premiums for a decade, according to banking officials and analysts.

Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

As the comments said in ballon juice; I wonder how they are going to blame this on Obama. It is clear that some idiots live in the US congress, most of whom think like our own short-sighted right-wing government. Words simply fail me in expressing how moronic not pre-planning for a bear economy by the institutions of government is.

Fortunately we had Michael Cullen massively reducing government debt and increasing savings. Of course now the current government wants to raid that cache for mere political reasons rather than looking ahead. But that is the way of plundering merchant banking and bankers

8 comments on “Words fail me ”

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  1. Draco T Bastard 1
    13 March 2009 at 12:03 pm

    It wasn’t Obama, no, but it certainly falls into the lap of the Clinton administration. I agree that we were certainly lucky to have Cullen taking huge chunks out of the government debt over the last few years.

  2. ghostwhowalks 2
    13 March 2009 at 12:18 pm

    Another trick used by the Bush Administration was to have a sunset clause( 2010) on the tax cuts for the wealthy they enacted , not because they didn’t think the wealthy didn’t need them anymore, but they could use the future projections of revenue to hide the big deficits built up.
    Another budget trick ( used by all administrations) is to use the surplus Social Security taxes collected as revenue rather than put them aside for the future payments. This money has to be paid back, for the coming baby boomers, and amounts to trillions $ and is never counted as part of the ‘deficit’

  3. Pascal's bookie 3
    13 March 2009 at 12:21 pm

    Astounding innit?

    It’s almost, all mostish like, when you look at it, as if people just didn’t care what happened next. Or maybe they did, but were just really stupid. Or maybe they did, weren’t stupid and it’s going to plan.

    http://www.newshoggers.com/blog/2009/03/looting-all-part-of-the-plan.html

    But that last would necessitate pitchforks.

    Draco,

    “but it certainly falls into the lap of the Clinton administration”

    Not to defend Clinton for his many faults, but this was Congress not funding the scheme, so while it is a bipartisan failure, the GOP gets lion’s share. Thanx Newt!

  4. gingercrush 4
    13 March 2009 at 12:59 pm

    Fortunately we had Michael Cullen massively reducing government debt and increasing savings. Of course now the current government wants to raid that cache for mere political reasons rather than looking ahead. But that is the way of plundering merchant banking and bankers

    What does that have to do with FDIC? In fact that whole statement is itself stupid.

    • lprent 4.1
      13 March 2009 at 4:18 pm

      Read the article. Essentially the bankers were saying that the good times would go on for ever. The republican legislators were stupid enough to take them at their word. Now they are in the crap with liabilities coming in that require a massive cough up from the state at a time when the state is struggling under a mountain of debt and forward liabilities.

      Essentially what would have happened to us if we’d had Key as finance minister under a Brash government. They were planning on doing the same things in 2005 in terms of taxcuts, diminished government debt repayment, and zero or negative forward saving for liabilities.

      In short, we were bloody lucky to have Cullen running the treasury. We aren’t in too bad a position by world terms. If Brash/Key had gotten in, they’d have screwed the governments financial position – just like Key is trying to do now.

  5. Snail 5
    13 March 2009 at 2:13 pm

    Thanks lprent,

    interesting for me was how the bad blood twixt bankers and the administration in the mid-90s played out.. very likely reluctance to fund ‘regular’ insurance added to this.

    At the link the latest FDIC appointed Chairwoman Bair(2006) informed readers:—

    Bair said yesterday that the agency’s failure to collect premiums from most banks “was surprising to me and of concern.” As a Treasury Department official in 2001, she said, she testified on Capitol Hill about the need to impose the fees, but nothing happened. Congress did not grant the authority for the fees until 2006, just weeks before Bair took over the FDIC. She then used that authority to impose the fees over the objections of some within the banking industry.

    “That is five years of very healthy good times in banking that could have been used to build up the reserve,” Bair, a former professor at the University of Massachusetts at Amherst, said in an interview. “That is how we find ourselves where we are today. An important lesson going forward is we need to be building up these funds in good times so you can draw down upon them in bad times.”

    Which realises PB’s correctness insofar as the GOP and Republican majoritied Congress.

    I think it also expresses the savings need against drawdowns that Mr Cullen’s example gives to prudent debt remittance and thereby illustrates (albeit in reverse) what I imagine gingercrush at least in its first part was getting to. Though I disagree with his conclusion.

  6. mike 6
    14 March 2009 at 9:46 pm

    “Fortunately we had Michael Cullen massively reducing government debt and increasing savings”
    Was that the forcast 10 years deficit he left us by chance?…

    • lprent 6.1
      15 March 2009 at 3:52 am

      I hardly think that even you can attribute the deep world recession to Cullen.

      So what you’re saying in effect is that if Brash had gotten in (with Key as finance minister), we’d now be looking at far more than deficit. Because their tax cuts were unsustainable in 2005 for the government to not go into debt. That would have left the government in debt from 2006 onwards running straight into the recessions.

      Why don’t you think before you write?