Everything Old Is New Again

By Number Six

Saturday, February 09, 2008 at 11:46 AM

Now, what did we say about letting Rethugs run stuff? Oh, well, a reprint of history is in works, as the FDIC....is circlin' the wagons, Jethro!

More after the break....

Remember back when the Rethugs stuck this bad actor into the White House? Let him run loose? Let the many Savings & Loans...blow up? Do we remember that?

Well, here we is again. Some interesting news warns us: History repeats itself:

On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor....as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.”

(http://www.fdic.gov/news/news/financial/2008/fil08002.html#body)

The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.

Good luck.

It's worth noting that, due to a rule change by Congress in 1991, the FDIC is now required to use “the least costly transaction when dealing with a troubled bank. The FDIC won't reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund....As a result, uninsured depositors are protected only if a bank acquiring the failed bank will pay more for all of the deposits than it would for insured deposits only.” (MarketWatch)

In other words:

1) The fecal matter is set to collide with the main rotors.

2) Uncle Sugar's gonna weasel sideways around bailing banks out.

So, what does it all mean?

It means there's going to be an unprecedented wave of bank closures in the US and that people who want to hold on to their life savings are going have to be extra vigilant as the situation continues to deteriorate. And it is deteriorating very quickly.

Where's Howard Ruff these days?

It all says a lot, among such: Deregulating banking is tantamount to bumming a Lucky Strike in Hell. Massive "deregs" during the Raygun era toggled much of the S&L Crisis of that era, and now, oh, lookee what Bush-o-nomics hath wrought. Yeah, let's drown government, yeah, neat idea.

So, we let the money lenders run wild, allow them to take credit cards, mortgages, and other crap and package them nice and neat into commodities...and does the phrase "junk bond" still ring a bell?

Thilly Rethugs. Ain't they so cute?