dear lord, this is a vicious cycle where there is no escape

Discussion in 'Trading' started by MohdSalleh, Nov 16, 2008.

  1. <b>FDIC may borrow money from Treasury: report</b>
    <br />

    <br />
    <br /> (Reuters) - Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
    <br /> The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
    <br /> The borrowed money would be repaid once the assets of that failed bank are sold.
    <br /> "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 said in an interview with the paper.
    <br /> Bair said such a scenario was unlikely in the "near term." With a rise in the number of troubled banks, the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.
    <br /> In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
    <br /> The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
    <br /> The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
    <br /> The fact 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, the Journal said.
  2. so? the fdic is just doing what they where meant to do, act like an insurance company. there was just a big earthquake, and now the fdic needs to payout $$. you know when the best time to invest in an insurance company is? right after a huge earthquake/hurricane because they just raise rates and end up back where they where before the storm.

    and yes i know that banks cant afford if the fdic raises rates. but nether can the home owners who just had a hurricane