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March 05, 2009

"Ray of Hope," Redux: Obama's Cramdown "Creates or Preserves" 6600 Points on the Dow

You think that's bad? There's worse. But See Update.

Bair Says Insurance Fund Could Be Insolvent This Year

(Update1)

By Alison Vekshin

March 4 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

For the first time in my adult life I am terrified to be an American.

I don't think I have to mention that sort of self-propagating misery machine we've got going here.

Hmmm... FDIC can't insure those deposits it's insuring?

Gee, I'll just take my money out of the bank and...

...crash the banks.

I don't know if the FDIC will really become insolvent or if this is just standard operating procedure for the Obamanauts, that is, to cry catastrophe whenever their taxes or expenditures are challenged. She slaps another tax (or "fee") on the already-strained banks, and when they protest, she drops the insolvency bomb on them.

Is she telling the truth? Or is she hoping to start a run on the banks just to shut up her critics?

Overstatement/Chicken Little Update: The insolvency of the fund will not mean that deposits are uninsured -- just that the corporation will have to go begging to the Treasury for more cash:

The deposit insurance fund won’t dry up because the government can get funds from the industry and congressional appropriations, and borrow from the Treasury, Chip MacDonald, a partner specializing in financial services at law firm Jones Day, said today in a telephone interview.

“As a depositor, I am not worried in the least,” MacDonald said. “No one is going to let the FDIC go without any money.”

Fine. I suppose this letter was intended for bankers and so they would know this. Yet I still think it's dangerous for an Obama official to phrase things this way. And they seem to go to the Panic Button whenever they're challenged at all.

Further, with all that money being freely spent, they could't have dedicated some of it to shoring up the FDIC? Banks are, after all, at the heart of this problem; the crisis originates there. So while we're spending money to study the methane content of moose-farts we can't spend money on the actual heart of the crisis?


Via Drudge.


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posted by Ace at 03:29 PM

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