FDIC - Cash Strapped Already???

Oh, what news reports are buried below the political machine hype.


I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses, -- Chairman Sheila Bair

They also are considering raising premiums in October. Bair also is planning on charging higher premiums to the more risky banks:

The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks

This is pretty early in the game to be borrowing money. According to these reports the FDIC has only borrowed money at the tail end of the S&L crisis in the 80's.

SmartMoney has more details:

The last time the FDIC borrowed funds from Treasury came at the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered. That the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis.

Kind of a mixed message. Bair is implying a short term need to borrow for liquidity purposes but doesn't expect to tap into a separate $30B credit line that is available.

One fact is the FDIC has never in it's history borrowed from the Treasury in this separate $30B credit line.

Is this more evidence we're in for one hell of a ride?

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Fannie/Freddie sell $3B of Debt - Wall Street Cheers


Fannie Mae and Freddie Mac sold $3 billion of short-term notes at yields that suggest the U.S. mortgage-finance companies are still capable of financing their businesses without government assistance

hmmm, ok, good news but how much debt do they really have?

Could this be pissing in a bucket?

With $1.5 Trillion in Liabilities-Pissing in a Small Coffee Cup

It's where they empty the coffee cup that has me worried.

Burton Leed

I don't think it's $1.5T

when a bank fails there is still a huge percentage of assets left.

$1.5 Trillion is a Roubini Estimate

Roubini repeated the $1.5 Trillion. The original number was a calculation of an estimate of default based upon 7 percent of the value of all mortgages outstanding.

Who really knows what that number is. It's a guess. Markets love to hear outside estimates so they can put a number on something an go on to other destructive actions.

Burton Leed

Roubini - writeoffs not the same as FDIC funds

$500B so far in write offs. But the write offs are not what the FDIC has to insure when a bank fails. There is still a huge percentage of assets.

For example, on the IndyMac failure, FDIC est. at $8.9B. Their total assets at the time of failure are: $32.01B and total deposits of $19.06B.

So, when they say write downs it's not the same as what the FDIC has to insure.

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