Posts Tagged ‘FDIC’

A Very Small Step

Friday, February 26th, 2010

The FDIC is experimenting with principal reductions for underwater borrowers.

It will only apply to those with loans from banks the FDIC has seized, and to severely underwater borrowers who continue to make payments over a long period of time, but it’s a positive step towards getting the housing crisis under control.

A far more effective step would be to allow bankruptcy court judges to modify loan terms, but that’s been defeated by the Congress twice. The banks remain the first pigs in line at the public trough.

Nothing much will happen with housing until supply (enormous and growing) and demand (puny) get back into balance.

Prices will have to fall further, perhaps 10-15% in the boom/bust areas of the country.

Gorilla thinks: “Washington is beginning to understand that propping up prices is at best a splintered crutch!”

Share

Tags: ,
Posted in Gorilla Meek | No Comments »

Bad Banks Rising

Tuesday, February 23rd, 2010

The number of troubled banks on the FDIC list rose 27% in 2009, and is now at the highest level since 1993.

There’s some concern that the FDIC may run out of money, although they’ve been trying to avoid borrowing from the Treasury (their lender of last resort) by asking banks to prepay deposit insurance premiums for the next 3 years (cash for clunkers in reverse, one supposes).

What this says is that the economy remains moribund, and that continuing losses from real estate loans will plague the banks for years to come.

Gorilla thinks: “The toasters soon will be toast!”

Share

Tags: ,
Posted in Gorilla Meek | No Comments »

FDIC Follies

Tuesday, September 29th, 2009

Once again, rather than making surviving banks and Wall Street pay for the disaster the country finds itself in, the FDIC, now rapidly running out of money as more banks fail, proposes its very own ponzi scheme.

The agency has asked banks to prepay deposit insurance fees now for the period 2010-2012. The banks get to list the fees as an asset, then charge it off as an expense once it’s paid.

The alternatives of course are not to the liking of politicians or bankers.

Politicians don’t want the FDIC to borrow from the US Treasury, even though it can by law, because this might be seen to be “bailing out the banks”, which as we know by now is only what happened in Goingbackwardville…

Bankers don’t want to pay extra insurance fees and say (apparently with a straight face!) they are worried that larger fees will limit their ability to borrow capital!!!

The FDIC solution assumes that there won’t be as many problem banks in 2012 as there are now. If it turns out they’re wrong, well, they can assess special fees on the banks or borrow from the Treasury!

Kicking the can down the road remains the only policy approach in Movingforwardville!

Gorilla thinks: “Irony is a wonderful thing. It too will be securitized faster than you can say Bernie Madoff!!!”

Share

Tags: , , , , ,
Posted in Gorilla Meek | 1 Comment »

Borrowing From Zombies

Tuesday, September 22nd, 2009

Yet another stupid idea to address the ongoing financial crisis: allowing the FDIC to borrow funds from banks to continue closing banks!!!

Seems the FDIC is again running out of money because so many banks are failing. Rather than raising insurance rates again on the surviving banks, it is suggested that the FDIC establish a line of credit to facilitate future closures.

Yes, it’s nonsensical to increase costs to the taxpayer in this way. Yes, it’s another example of how little control Washington is really exerting over a financial services industry that is out of control. Yes, the problem of zombie banks remains, and will be exacerbated by CRE and ARM reset disasters to come.

Gorilla says: “The FDIC is at sea, but the solution to bailing out the banks is not to keep filling the boat with water!”

Share

Tags: ,
Posted in Gorilla Meek | No Comments »

Running Out Of Money Again

Thursday, August 27th, 2009

The FDIC is running out of money, just as it did during the S&L debacle.

The problem? The number of bank failures has risen dramatically, from 3 in 2007 to 25 in 2008 to 87 so far this year. Given the impending collapse in commercial real estate, there could be another 1,000 banks failing in the next 5 years.

The solution? Either borrow from the Treasury or raise the fees charged to the remaining banks for deposit insurance (the FDIC has already done so earlier this year).

Meanwhile, the FDIC has decided to make it easier for private equity investors to acquire failing bank assets, principally by keeping capital requirements low (10%).

Gorilla thinks: “When you’re bailing, there’s nowhere to run, except on banks!”

Share

Tags: ,
Posted in Gorilla Meek | No Comments »