The 'Helicopter
Economics Investing
Guide' is meant to help
educate people on how to
make profitable investing
choices in the current
economic environment.
We have coined this term
to describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is the
official blog of the New
York Investing meetup.
Economics Investing
Guide' is meant to help
educate people on how to
make profitable investing
choices in the current
economic environment.
We have coined this term
to describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is the
official blog of the New
York Investing meetup.
 | |  | |  | |  |
© 2010 realefinancemedia.corp - all rights reserved
FDIC Swan Song:
8 Banks a Week
Daryl
Montgomery
08/22/2010
8 Banks a Week
Daryl
Montgomery
08/22/2010
Included in this week's closures was the notorious ShoreBank in Chicago. In a separate
weaken the U.S. banking system.
The FDIC is operating on both borrowed time and borrowed money. This agency is the
bulwark protecting American's savings in the case of failed banks, but the FDIC itself is
close to going broke. The eight closures this week alone cost the FDIC’s deposit-
insurance fund $473.5 million. The deposit insurance fund was already $20.9 billion in
the hole at the end of the fourth quarter in 2009. In order to plug the hole and keep
going, the FDIC in December forced banks to prepay three years of insurance
premiums and raised about $45 billion by doing so. That money had to pay off the
deficit already accumulated and then last for the next 156 months of bailouts. There
have been weeks this year when the FDIC has had to shell out close to $1 billion for
bank rescues. That $45 billion isn't going to last much longer.
ShoreBank was the most significant bailout this week. The bank was founded in the
South Side of Chicago in 1973 and was the nation's first community development and
environmental bank. Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley
(MS), Citigroup (C), Bank of America (BAC), American Express (AXP), GE Capital (GE),
and Wells Fargo (WFC) were investors. The bank has indirect ties to a number of
members of the Obama administration. The bank was under a cease-and-desist order
from the FDIC for more than a year before it was finally closed down. Its remaining
assets will be transferred to a newly created corporation, Urban Partnership Bank.
Some of the same executives from ShoreBank will be running this newly chartered bank
(once they drive Urban Partnership Bank into the ground, it too will be bailed out). It
looks like the investments of the too-big-to-fail, or even lose any money, big bank
funders will also be protected under this arrangement by transferring them to Urban
Partnership Bank.
Meanwhile, the poorly thought out and even more poorly run HAMP program is not
making a big dent in slowing foreclosures. Nearly half of the 1.3 million homeowners
who enrolled in the Obama administration's flagship mortgage-relief program have
already fallen or more likely been pushed out. Mortgage holders blame the banks for
not cooperating and banks blame the mortgage holders. According to RealtyTrac, the
nation is headed toward more than one million foreclosures this year - a higher
amount than the 900,000 homes repossessed in 2009. Boy, HAMP is certainly doing a
great job in significantly reducing the number of foreclosures. Well, I guess it's just too
much too expect that something will be accomplished for only $75 billion in taxpayer
money.
Based on this week's events, I have written the following theme song for the FDIC
(maybe Sheila Blair will sing it at the next board meeting) to be sung to the tune of the
Beatles 'Eight Days a Week':
Oh I'll bail out your bank babe,
Guess you know it's through,
Hope you like the money banker,
When I'm funding you,
Spent it, Lost it, Pay Me, Save Me
Don't do nothing but bailouts,
Eight banks a week
Daryl Montgomery
weaken the U.S. banking system.
The FDIC is operating on both borrowed time and borrowed money. This agency is the
bulwark protecting American's savings in the case of failed banks, but the FDIC itself is
close to going broke. The eight closures this week alone cost the FDIC’s deposit-
insurance fund $473.5 million. The deposit insurance fund was already $20.9 billion in
the hole at the end of the fourth quarter in 2009. In order to plug the hole and keep
going, the FDIC in December forced banks to prepay three years of insurance
premiums and raised about $45 billion by doing so. That money had to pay off the
deficit already accumulated and then last for the next 156 months of bailouts. There
have been weeks this year when the FDIC has had to shell out close to $1 billion for
bank rescues. That $45 billion isn't going to last much longer.
ShoreBank was the most significant bailout this week. The bank was founded in the
South Side of Chicago in 1973 and was the nation's first community development and
environmental bank. Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley
(MS), Citigroup (C), Bank of America (BAC), American Express (AXP), GE Capital (GE),
and Wells Fargo (WFC) were investors. The bank has indirect ties to a number of
members of the Obama administration. The bank was under a cease-and-desist order
from the FDIC for more than a year before it was finally closed down. Its remaining
assets will be transferred to a newly created corporation, Urban Partnership Bank.
Some of the same executives from ShoreBank will be running this newly chartered bank
(once they drive Urban Partnership Bank into the ground, it too will be bailed out). It
looks like the investments of the too-big-to-fail, or even lose any money, big bank
funders will also be protected under this arrangement by transferring them to Urban
Partnership Bank.
Meanwhile, the poorly thought out and even more poorly run HAMP program is not
making a big dent in slowing foreclosures. Nearly half of the 1.3 million homeowners
who enrolled in the Obama administration's flagship mortgage-relief program have
already fallen or more likely been pushed out. Mortgage holders blame the banks for
not cooperating and banks blame the mortgage holders. According to RealtyTrac, the
nation is headed toward more than one million foreclosures this year - a higher
amount than the 900,000 homes repossessed in 2009. Boy, HAMP is certainly doing a
great job in significantly reducing the number of foreclosures. Well, I guess it's just too
much too expect that something will be accomplished for only $75 billion in taxpayer
money.
Based on this week's events, I have written the following theme song for the FDIC
(maybe Sheila Blair will sing it at the next board meeting) to be sung to the tune of the
Beatles 'Eight Days a Week':
Oh I'll bail out your bank babe,
Guess you know it's through,
Hope you like the money banker,
When I'm funding you,
Spent it, Lost it, Pay Me, Save Me
Don't do nothing but bailouts,
Eight banks a week
Daryl Montgomery
