Can FDIC handle simulataneous bank failures?

Discussion in 'Economics' started by turkeyneck, Mar 14, 2008.

  1. Say C and BAC are going under at the same time?
  2. yes. cause the FDIC $$ come from our own printing press.
  3. gwb-trading


    Normally the FDIC attempts to merge banks when they fail. This means that they don't have to payout the customer accounts to the FDIC limit, and the only problem facing the FDIC is all the time/staffing needed to put together the merger. Also keep in mind for large banks such as C and BAC only a portion of their business is within the realm that the FDIC covers. It would be likely that the FDIC would peel-off and take over their consumer banking (non-credit card) group and merge it, and let the investment banking, etc. etc. sink. Many of these large bank operations are not covered by the FDIC.

    Keep in mind that the real threat to the FDIC is not the failure of larger banks, but a string of failures of smaller banks (similar to the Savings & Loan crisis in the 80s). Many smaller banks will be in such bad shape that nobody will merge with them, and nearly 100% of the assets of these banks are FDIC covered. This means that the FDIC will have to payout and will not have the cash to cover a great number of these type of regional bank failures.

    - Greg
  4. just21


    If they don't run out of ink or trees then no problem.
  5. Now you see why money should be replaced with electronic credits....

  6. TGregg


    Electrons, now-a-days.
  7. Div_Arb


    Soon to be cuneform-inscribed stone tablets and pretty beads.
  8. the fdic has a bundle of $$ from collecting insurance over the years.

    remember taht they just bail out deposits up to 100K so they don't backstop the market value of the bank or anything else. even if the entire financial system fails their problems will be quite small compared to the other agencies.
  9. amylase


    It has not been experimentally tested yet. But Mr. Bernanke is setting up an experiment to test this theory quite soon.

    Lets get together here when results are out to do some data analysis.

    My theory goes that FDIC can save so many banks only through inflation, so it's a zero sum game
    #10     Mar 14, 2008