I had a turtle head crawl on back up the shoot after reading this. I'm hiding gold in my backyard.

The weasel response scared me a hell of a lot more than the Bloomberg report

I have to say that it worried me a little when I received this as a part of my FDIC news subscription. I haven't even read the Bloomberg article and this sounds like BS.

Then entire banking industry only has $1.3 trillion? And they may need to bail out FDIC for a tune of $150B? We are so screwed.

Thanks CR,

So on the one hand, systemic risk is unlikely to happen and on the other hand if we get there, will just reallocated that 1.3 Trillion to the FDIC to shore up failed banks, which of course will completely tie up capital for regular lending and cause rapid economic contraction...but everything is fine.

And if lots and lots of banks fail, so there aren't enough left to bear the increased premiums-- what then?

Let's see how WaMu with 2300 branches gets handled. Let's just see. I dare you. FDIC eviscerated it's ranks post S&L. I don't think they can handle 50 regional banks failing let alone one really large one after Indymac...

What we need folks is a government bank. One that takes deposits from all comers. One guaranteed not to fail. Sooner or later we'll come to that. It is essential. It could offer lower rates of interest than private banks in return for the security, but we need it. For times like these.

GDP of US 14,000,000,000,000.00
GDP of world 42,000,000,000,000.00
Amount of private mortgages in default of 30 days back 500,000,000,000.00 (5T at very agressive 10% default 30days+)
Amount of derivatives in shadow banking system 1,400,000,000,000,000.00

Think you can do jack !%$@%$!@ with
250,000,000,000.00

Deranged? yeh but also

FLIPPIN' PRICELESS

My favorite line:

And, remember, no depositor has ever lost a penny of insured deposits, and never will.

Except to inflation, taxes, and wallstreet.

Have the Treasury take out a CDS on the FDIC so when it goes bankrupt you can fund the bailout.

Gold Medal CMBX diver writes:
is she saying the FDIC is well-capitalized?
I think she's saying they have lots of liquidity...lol

"sacred pledge????"
Is there one? Did I miss something?

It's called a vicious circle when you start raising the insurance premiums on fewer and fewer banks at a time when they need to lend more and more to get capital flowing. I believe it takes them 3 days, Friday, Saturday, and Sunday to declare systemic risk.

geez

"blackhat writes:
It's called a vicious circle when you start raising the insurance premiums on fewer and fewer banks at a time when they need to lend more and more to get capital flowing. I believe it takes them 3 days, Friday, Saturday, and Sunday to declare systemic risk."

Which makes the banks hoard cash, which decreases lending, and raises interest rates. Ultimately causing more stagflation. Or depression. Or bipolar disorder of the arse muscles, or something.

waffling on warrants... Schumer you putz!
sc | 09.25.08 - 3:37 pm | #

How can there be warrants on a purchase of an asset?

It like a construction company selling me a real crappy used crane, and offering warrants to shares of the company if I can't resell it later.

Makes no sense.

YouTube -

Me and Ben got the gats; we're out to rob a bank.
We got George outside carrying a full pack.
Now everything's cool and everything's smooth. (Hey that's smooth!)
I walked up to the teller, I gave her the letter
She gave me the loot with puckered up lips
and a wink that I found cute, and I said,
"Hanky Panky Baby"

For those that don't have toothpicks under their eyes is the exchange below a lightbulb moment?

Gavshire Hathaway writes:
"The entire banking industry only has $1.3 trillion?"

And we just bailed them out of $700 Bil in losses?

A TRUE CLASSIC!!!!!

I'm against the $85,000,000,000 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in a "We Deserve It Dividend".

To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billion that equals $425,000.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.

Of course, it would NOT be tax free. So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500 in taxes. That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500 in their pocket.
A husband and wife has $595,000.

What would you do with $297,500 to $595,000 in your family?

Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it'll be there to save in a bank or create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent's medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces world wide.

If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000 ( "vote buy" ) economic incentive that is being proposed by one of our candidates for President or the $1200 provided by the current President.

If we're going to do an $85 billion bailout, let's bail out every adult US Citizen 18+!

As for AIG - liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't. If they did, they wouldn't be in the mess they are in now!

Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party! How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC .

And remember, The Family plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

Ahhh...I feel so much better getting that off my chest.

"kevin de bruxelles writes:
Hey if McCain can block this thing then even I would vote for his pathetic ass."

He's not gonna, 'cause Mommy McCain would take away his pocket money.

Hey if McCain can block this thing then even I would vote for his pathetic ass.

He sure has to do something to save his campaign. So why not.

CR,

I wonder what the current net-drain IndyMac has on FDIC.

"Hi! My name is Sheila Bair from the gov. and I am here to help you!"

von Mises (Europe) writes:...

WTFFFFFFFFFFFFF is this. Is this your new vice president?????
von Mises (Europe) | 09.25.08 - 3:51 pm | #

No. Airhead Palin is icky-- Katie says so, and what Katie says today, soccer moms will think tomorrow.

This is how Bush is going to get congress to approve his bailout/giveaway to banks:

A Kentucky man who claims his penis was removed without his consent during what was supposed to be a circumcision has sued the doctor who performed the surgery
(AP news)

This bill has less public support than the immigration bill that's gotten killed for the past 6 and 7 years.

I had some hope after the hearings but Congress has completely caved as some here predicted. Heck, the LAT front page this morning had a very negative headline, and then Congress flips around just willy nilly like this?

The ponies are in Congress, and unfortunately they need to be shot.

I guess this is the WAMU memo.

We should all begin to wonder at the bottomless US Treasury!!!

Miracle of miracles!

We have more treasury bonds to sell!

I sense a miracle of fishes and loaves!

This is going to be much worse shortly.

My sense of foreboding is going off like a five alarm fire.

I wonder if we are getting the international margin call on the dollar informally from our creditors.
That story from China killing off all lending to US banks was a big warning shot.

Someday this war's gonna end...

Bruce - with math skills like that I am amazed you are not on the Senate Banking Committee. Have you completed high school yet?

OK, see that others noticed this math error by Bruce, too. My faith in the CR community is regained LOL.
-rix

"And, remember, no depositor has ever lost a penny of insured deposits, and never will."

Haven't they heard "never say never?"

And, at the same time, we will propose higher premiums on higher risk activity to create economic incentives for poorly managed banks to change their risk profiles.

I see. So you're gonna charge Corus huge premiums for all those empty, half-finished condos they finances in Miami Beach. Right?

That will help a lot.

mp, all depositors will be paid in FRNs.

After all Greenspan once promised that all Social Security payments would be made too.

He added the caveat that he was unsure as to the purchasing power of those payments.

Nice to buy a postage stamp.

Someday this war's gonna end...

"Nice to buy a postage stamp."

Forever stamps are a great inflation hedge.

Hey I didn't write or vet it. I just read, LMAO and passed it on. Too bad the math was wrong...

The author must be in DC

What happened to the circuit-breaker day we were promised?

Of course I'm not registered. Haven't been for over 15 years. So that's what my vote is worth.

Nostrovia,
Comrade Misean | 09.25.08 - 4:08 pm | #

Well, if we let Misean vote it's a slippery slope to aliens and felons . . .

"What happened to the circuit-breaker day we were promised?"

(1) One part, extra slosh, despite recent draining;
(2) One part, foolish optimism that the bailout will help [OK, the first few days will be OK];
(3) One part tin foil hat reasons.

One last thing before nap time:

This may be an analogy, then again, maybe not.

As Mr. Lame Duck Bush said a few months ago, Wall Street got drunk and they have been active in an orgy which has gone on for many years; maybe this is a non-stop party, maybe tradition, maybe cultural, maybe pathological, who can friggn say?

If we put this party into perspective and all the players, cops, judges and associated regulatory participants, we can thus suggest that there was collusion and corruption in this system.

Hence, as the party grew in size, it became more chaotic and more abusive.

Thus, if we take this system, where the party was being played and suggest that wall street is like a machine, maybe we can also say wall street is akin to a nuclear reactor.

Ask yourselves then, if we should have the same drunks return to the control rooms!

Re: The Chernobyl disaster was a nuclear reactor accident in the Chernobyl Nuclear Power Plant in the Soviet Union. It was the worst nuclear power plant accident in history and the only instance so far of level 7 on the International Nuclear Event Scale, resulting in a severe release of radioactivity into the environment following a massive power excursion which destroyed the reactor. Two people died in the initial steam explosion, but most deaths from the accident were attributed to fallout.

Re: Chernobyl disaster - Wikipedia, the free encyclopedia

Wake up America!!!!

In other words...

We're going to need a bailout, sorry I mean rescue plan, very soon maybe even by next weekend. We love patching our system up on weekend.

"It means that McCain is trying to save his campaign by doing the 11th hour hero bit, and Barney is complaining that he's sticking his nose in. Just the usual fun and games.
Scone | 09.25.08 - 4:13 pm | # "

Yeah, I think McCain is clueless, but if he scuttles this bailout, I may have to re-evaluate my opinion.

I no longer believe a single word uttered by a government official. And especially when it comes to financial matters. Bernanke and Paulson have destroyed any credibility of anyone in government - its as if FEMA is now in charge!

From the bloomberg article:

"Because all deposits up to $100,000 are insured, most savers can be agnostic about where they put their money. They don't have to know -- or care -- whether a bank is making sound or foolish loans. Unlike buyers of stocks or bonds, people who put their money in banks rarely do research about the soundness of the institution. That makes it easy for banks -- both prudent and reckless ones -- to raise cash."

So in one way, the FDIC actually helps banks take on risk by making one bank appear as sound as any other.

To be fair, Wells Fargo does not inform me of their investment and loan behavior. I had to learn from the Irvine Housing Blog about the many 2nd mortgages getting completely wiped out in foreclosures and short sales. Seems to me banks should inform depositors about what they are doing with that money.

The more talk I hear from government officials about how "sound" everything is, the less I believe they have any idea that the unthinkable (in this case the failure of the FDIC to prevent bank runs) could actually occur and the more likely I am to believe it actually will.

If we're blowing $700 Billion on the current crisis, how much more are we going to blow setting up new institutions to serve depression-era roles as the economy collapses? Why not just set those up now?