FDIC to Add Staff as Bank Failures Loom

FDIC to Add Staff as Bank Failures Loom

online.wsj.com

The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen.

The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships... The agency, which insures... more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.

(visit the link for the full news article)

More:

"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia,"

In job postings on its Web site, the FDIC said it is looking for people with "skill in performing duties associated with a financial-institution closing, such as receivership management, resolutions and/or asset disposition; knowledge of the resolutions process as it relates to complex financial institutions."

The FDIC is ramping up it's staff to deal with the fallout of the current state of the economy. Bank failures are on the way so they're bringing back retirees, advertising in newspapers and posting jobs to their websites. These jobs pay up to $180k per year so you know they are going to have to justify that kind of expense going forward. The cost of these actions speak to the fact that they are not just cautionary but will indeed be needed.

The writing is on the wall and my money is still on the likes of Citibank as a prime candidate for a spectacular failure.

During the Savings and Loan crisis the staff at the FDIC numbered almost 15 000 and has since fallen to 4 600 during the "good times". While they are ramping up for the next crisis looming on the horizon some people still claim the economy is strong and doing fine.

The Bush administration is in denial.

If this action by the FDIC isn't a harbinger of things to come, I don't know what is.

One more thing, did you notice this?

At the end of 2007, it had $52.4 billion in its fund that backstops the nation's insured deposits.

I'm not an expert on the subject of deposit insurance but I feel I need to point out what I have found in the past about the FDIC:

DRESSED UP FOR THE PROM

The FDIC deposit insurance has a number of problems. It encourages risk taking by insured institutions to a degree that they probably would not do if they did not have this government safety net. It also causes a certain neglect by depositors who simply don’t worry about their money being in a fragile bank because they are convinced that the government will print the necessary money to pay them off if the bank fails. The whole deposit insurance scheme actually backfires..

If there was a massive failure, it might take years before the FDIC could actually figure out how to get the necessary dollars to individuals. No one considers the fact that if such a scenario developed by the time you got the dollars, they might be worthless. To consider the government as the lender of last resort and the ultimate bale out of all financial emergencies is to seriously misunderstand the complexity of what can converge. Simply printing money to neutralize a crisis doesn’t necessarily have the effect that people think it does.

Ultimately who pays for the FDIC insurance if not you?

THE LIQUIDITY CRISIS OF 2007 - A Question and Answer Survival Guide

Doesn't FDIC insurance mean that bank deposits are safe now?

FDIC insurance isn't really insurance, it's a pool of money to be used to buy up enough bad loans off the failed bank's books to make it attractive to a potential buyer. It's not used to pay back the depositors.

It only works when bank failures are isolated events, and will not work in a systemic crisis.

The purpose of FDIC insurance is not to really guarantee the safety of the banking system, but to prevent runs on banks by reassuring investors that their accounts are insured. Bank failures, however, are not really an insurable event.

The FDIC can't handle a systemic banking crisis or for that matter one really big bank failure.

Market WrapUp

The deterioration in the banking industry is best illustrated in the Federal Deposit Insurance Corporation’s (FDIC) Quarterly Banking Profile. The report for the second quarter of this year was released a few weeks ago and the deterioration in bank balance sheets is clearly visible.

There were 824 institutions reporting net losses for the quarter, ... The proportion of FDIC banks that are unprofitable rose to nearly one out of every ten banks

The report suggests that eroding credit quality is spreading beyond home mortgages as all major loan categories ... Imagine what the banks' balance sheets are going to look like in the third quarter when they reprice their mortgage-backed securities.

BEHIND CLOSED DOORS

Most people look at the FDIC sticker on a bank’s door and assume that they are safe and that if there ever is any problem, the government will always bail them out. Few realize the increase in the size and scope of FDIC bailouts since the U.S. came off of the gold-exchange standard in 1971. Fewer still realize that it is completely up to the FDIC’s discretion to decide which banks it will bail out and which deposits it will insure and which ones it will not.

FDIC Insurance Scam

Former FDIC Chairman William Seidman charged that the 1980 increase in insurance coverage gave the savings and loans "a $100,000 credit card issued by Uncle Sam and made the government a full partner in a nationwide casino...."

Congress needs to find ways to limit the liability of the insurance funds and the risks to the taxpayers, not increase them. There is no justification for an increase in the insurance coverage which many experts feel is already excessive and a negative influence on the safe and sound operation of depository institutions.

Spitting in the Eye of a Hurricane

The FDIC is a joke. Walk into a local lender and everybody and their dog has signs saying everyone is insured up to $100,000 on all their accounts.

...the FDIC does not have the liquidity to bail out ... without Alan Greenspan inflating the heck out of the current fraud money system. When you get right down to it, the FDIC doesn’t have enough money to bail out ... if every FDIC insured lender went belly up.

Believing that the FDIC (or the CDIC here in Canada) will come to the rescue of your money under a real economic emergency (a series of bank failures) such as they had in Brazil recently or Germany pre-WWII is more than a bit naive IMO.

Especially, if you're counting on that money to make the monthly rent.
.

edit: expired link updated

[edit on 2/27/2008 by Gools]

www.svpvril.com...

FDIC insures only deposits of "public money," and as demonstrated by 12 U.S.C. § 1821(a)(2)(A) and 31 CFR § 202.1, only officers and employees of United States Government and political subdivisions of the United States are entitled to receive and use public money. In fact, the controlling definition of "State" which prescribes territorial jurisdiction of FDIC at 12 U.S.C. § 1813(a)(3) provides one of the most inclusive lists of "States of the United States":

1. (3) State. - The term ''State'' means any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern Mariana Islands.

(Comment) Notice the word "TERM" in the beginning of the definition to alert you that it is a technical specific closed meaning to those words employed in that section. Now we know that insular possession are not ‘states” as we understand the word, but Congress uses “terms” to hide the real meaning, Here’s another way of explaining it. (the definition is limited by the examples)

Black's Law Dictionary, 6th Edition, as follows:
Inclusio unius est exclusio alterius. The inclusion of one is the exclusion of another. The certain designation of one person is an absolute exclusion of all others. Burgin v. Forbes, 293 Ky. 456, 169 S.W.2d, 321, 325. This doctrine decrees that where law expressly describes particular situation to which it shall apply, an irrefutable inference must be drawn that what is omitted or excluded was intended to be omitted or excluded. Kevin McC v. Mary A, 123 Misc.2d 148 N.Y.S.2d, 116, 118.

So it would appear, technically speaking, no private deposit is insured, and the FDIC is limited to D.C, and insular possessions.

mod edit: "ex" tags applied

[edit on 2/28/2008 by Gools]

Originally posted by Gools

The Bush administration is in denial.

If this action by the FDIC isn't a harbinger of things to come, I don't know what is.

See what I mean?

Bush: US is not headed into recession



I can't believe this thread has garnered no interest, especially considering your money is at risk!

Then again, maybe nobody has any money to worry about and it's all debt.
.

Originally posted by Gools
Then again, maybe nobody has any money to worry about and it's all debt.
.

Bingo.

Who has savings anymore?

If you have money it is tied up into one market or another. That is why you have money, you send your dollars out into the world to recruit more dollars.

If you dont have money it is either a zero balance every month (card swiped, check deposited, bill paid) or the welfare line.

No one actually saves money in banks anymore.

Many on ATS spend the cash they do get on important things, like gold guns and goats. Thats where my wealth is, the only safe investment these days.

More FDIC related news.

New recession worry: Bank failures

NEW YORK (CNNMoney.com) -- As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising.

The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s.

"This economy lives and dies on credit," he said. "If the megabanks are stuck with billions in leveraged loans eating up precious space on their balance sheet, they won't be able to originate new loans. That's bad for everybody."

Experts say the 76 banks now under scrutiny are likely only a small part of the problems now looming over the banking sector.

Jaret Seiberg, the financial services analyst for policy research firm Stanford Group, said it appears that regulators are expecting about 200 bank failures in the coming year or two. If that occurs, it could rival the flood of bank failures seen during the S&L crisis. In 1989, the nation saw a post-Depression era record of 206 bank failures.

Also there are several headlines (once again) involving Citibank that may spell disaster for the biggest of the big banks:

Merrill sees more write-downs for Citi
Sovereign Funds May Not Save Citigroup
.

[edit on 3/4/2008 by Gools]

FDIC Update

Bank regulators shutter First Integrity bank

WASHINGTON - Federal regulators on Friday shut down a small Minnesota bank called First Integrity, saying unsafe practices had weakened its financial condition. Full Text

OCC Closes First Integrity Bank

Failed Bank List

Bad News Banks

Originally posted by Gools

Then again, maybe nobody has any money to worry about and it's all debt.
.

BINGO! No money...all debt.

Many thanks to writers like Fekete & Schoon...high profile trader Jim Rogers...and 'rogue' politician Ron Paul for raising public awareness.

The Shell Game
Darryl Robert Schoon
May 28, 2008

DURING THE GREAT DEPRESSION - MONEY DID NOT DISAPPEAR - CREDIT DID

The answer to: Where did the money go in the Great Depression? is found in the metaphor of the shell game. It is now clear that money didn't disappear during the Great Depression, credit disappeared.

The money was never there in the first place. Money had been replaced by credit in the shell game introduced by the Federal Reserve in 1913 when the Federal Reserve began issuing credit-based Federal Reserve notes in place of the savings-based money from the US Treasury.
Full Text