Is the FDIC misleading the american public?

Discussion in 'Economics' started by Daal, Jul 28, 2008.

  1. Daal


    Regarding the two recently failed banks, I simply cant make any sense of the math behind this, maybe I'm wrong and someone familiar with banking and the FDIC can clarify

    "The 28 offices of the two banks will reopen on Monday as branches of Mutual of Omaha Bank. All depositors, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits."

    If Mutual of Omaha is assuming all deposits(liabilities) then why the FDIC losing $800m?

    "The cost of the transactions to the Deposit Insurance Fund is estimated to be $862 million. "

    This cant be losses from receivership expenses, this is serious money

    "Mutual of Omaha Bank's acquisition of all deposits was the "least costly" resolution for the Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the banks' franchises."

    I cant make sense out of this, why is a bank paying a premium for liabilities, I understand that they come with the failed banks branches(and possibly the real estate and equipment) but I still cant see how this can be profitable

    " Mutual of Omaha Bank will purchase approximately $200 million of assets from the receiverships. "

    This could be a lot of loans being bought for a cheap price but that math is still not there. if you buy assume $100 in debt you need at least that much in matching assets to make it worth it. I understand that deposits might lead to other kinds of fees(and new depositors) and etc but how is that different from interest on any other kind of debt, you still need a lot of assets to make the 'carry' positive

    I shoot an email to Mr. Mortgage and he said he had no clue what was going on and possibly there could be backstops from the government on the debt
  2. A government agency/institution misleading the public?

    I refuse to believe that such a thing could & would ever happen. :p