Banking: Q&A With FDIC Chairwoman Sheila Bair | Newsweek Business

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Posted By: austin c @ 07/26/2008 10:53:32 AM

foggy @ 07/24/2008 9:19:37 AM wrote: " The information from Chairman Bair is straight from the horses mouth - why on earth would you believe the media over the person who runs the show?????" You may be making a mistake in believing that all the branch chiefs ( usually a party loyalist) know all the business details in the branch. The real experts are the professionals in their branch or in the media .
On the topic of FDIC insurance limit, their web page shows the following, presumably written by their experts
http://www.fdic.gov/deposit/deposits/deposit/faqs/faqs.html#single
which seems to be different from what said in this Q/A related to insurance.

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Posted By: austin c @ 07/20/2008 4:01:39 PM

I am surprised to read what the Chairwoman said about the FDIC insurance limit, i.e. 100,000 dollars per account for each individual. I have heard in some news media that the insurance limit is $100,000 per depositor instead of per account. I believe she is wrong
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  Posted By: foggy @ 07/24/2008 9:19:37 AM
  
  The information from Chairman Bair is straight from the horses mouth - why on earth would you believe the media over the person who runs the show?????

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Posted By: guymc @ 07/23/2008 9:19:34 PM

Chairwoman Bair has suggested a simple solution that, according to daniel Gross, has been all but ignored by the rest of our government and the greedy banking industry: That is to rewrite the loans at consumer favorable terms. It seems that 3rd grade arithmetic would support the Chairwoman's plan. Possibly the banking industry never got that far- hence the "crisis". It seems a no brainer to me that if you limit the number of forclosures, you limit the bank failures and there for the "crisis". The fact is some banks are only marginally affected by the crisis and welcome the demise of competitors. Buying up competitors is expensive- ask BofA- but if a fire sale atmosphere is created, then the price of gobbling up the competition is reduced. As a lovely bonus, the SEC looks the other way and you get a virtual "Monopoly". It will get even better when the next crisis- the credit card crisis- created from squeezing .borrowers that have succombed to the teaser balance transfer rates find out they can no longer move their money from one bank to the other to avoid the 28% payback rates because there are not enough banks left to deal with. This will make our "mortgage crisis" look like chump change. The banks will be just as stubborn about rewriting the debt at reasonable rates because they have the bankrupcy reform act on their side. This is not only greedy, it's insidious. The only real solution is for Congress to get the banks out of their pockets and show some common sense- force the banks to mitigate their losses by rewriting at least 90% of their "bad" mortgage loans, put a moratorium on all foreclosures, and put a limit on creditcard interest rates. The sad part is that there is little chance of that, so we go to the next crisis: Who will pay to build all the poorhouses?

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Posted By: pdcreative @ 07/17/2008 9:50:29 PM

While I can completely understand why the FDIC chair would want to reassure the public of the safety of American banks, the truth is much dicier. U.S. banks are in some big trouble right now, and this is not exactly a well-kept secret either. U.S. banks have HUGE mortgage liabilities still on their books. Yes, it's true that these liabilities are technically off balance sheet, but it's only an accounting technicality. Banks have simply shuttled their mortgage debt into wholly-owned ???special purpose vehicles???. When they write down this debt, it comes right back on their balance sheets. This is precisely why banks, despite the hundreds of billions of dollars in losses already, are hesitant to write down all of their losses.
However, banks still have tons of bad debt on their books and there are heavy, heavy losses still to come. Many bank accounting departments are only now being directed to begin writing down the bulk of their losses.
If banks were healthy, as Chairwoman Blair claims, they wouldn???t be feverishly calling in loans, as they presently are, nor would they be very willing to lend only on the most stringent of terms, which they are. Banks have also benefited by the fact that they have been able to supplement SOME of their losses by raising additional capital via new stock issues and foreign wealth funds. This money is now drying up. These sovereign wealth funds are no longer willing to put more money into failing U.S. banks, as they have already suffered massive losses on their initial investments.
There are a number of banks which may be technically insolvent right now. Among them are Citi and Bank of America. Yup, that???s right. The two biggest American banks may actually be broke right now. Their losses are grievous and will only get worse. While it???s unlikely the government will let these banks fail, the cost of saving them will be in the tens, in not hundreds of billions.
In closing, consider this: the FDIC just blew 10-15% of its entire deposit insurance fund on one bank (IndyMac). The FDIC expects a further 100-150 banks to fail (it has said so publicly), although non-governmental estimates have exceeded 300. Wanna guess how much that???ll cost? Feel like guessing if everyone???s going to get their money back if all of these banks fail? Considering that the government is likely to bail out Fannie Mae and Freddie Mac, which are right now insolvent; they???ve already bailed out a Bear Stearns to the tune of $29 billion, it???s a wonder we have any money left. If the government engages a full bailout of Fannie and Freddie, it will double the national debt from $5 trillion to $10 trillion. You know what they say, a trillion here, a trillion there and soon we???re talking about real money.