sorry

Today in Bailouts and Financial Rescues

Stress Test: Regulators plan to meet early this week to discuss how to analyze the results of stress tests / being conducted on the country’s 19 largest banks. [WSJ]

They are going to talk about how to do this? They didn’t know before they started? My confidence ebbs daily.

http://www.fdic.gov/news/news/press/2008/pr08084.html
«As per our authorizing statute, any money we might borrow from the Treasury must be paid back from industry assessments.» «The FDIC receives no federal tax dollars – insured financial institutions fund its operations.»

In other words that all the institutions whose deposits insured by it have unlimited liability to the FDIC, which has been set up as a depository institution self-insurance pool. Treasury loans are provided
only as working capital, to bridge the gap until the payments made by the FDIC are *fully* recovered from the capital of depository institutions (down to the last cent of that capital).

I don’t think there is any provision as to what happens if the losses to depositors are greater than the combined capital of all FDIC members. But it seems pretty clear that in practice the FDIC is backstopped not just by the whole capital of all its members, but also by the State.

And in any case the idea that a large part or all the capital of all solvent banks can be “assessed” by the FDIC before the State backstops the rest to pay off the depositors of insolvent banks is politically ludicrous, even if that seems to be the law. Congress would provide public funds well before all the capital of all FDIC members is wiped out.

Which may happen yet — according to the FDIC that capital is $1.3t and aggregate losses may well approach or top that…

Why should they have any reserves other than to pay beaurocrats to count and guard them,
and to furnish material for academics like yourself and Rolfe?

How much reserves would be enough according to the latest academic theoretical research?

Would printing enough money to reach some arbitrary threshold derived from non stake holders count as green jobs?

But I know what ya really meant.

http://market-ticker.org/authors/2-Karl-Denninger

You are incorrect about the TLGP being separate from the DIF — The FDIC merged the two in March. (Their Press Release is here).

Also, the fees collected are inconsequential compared to the liabilities absorbed, especially when you consider the issuers are all insolvent. There’s no way FDIC is charging enough to compensate adequately for the risk being taken.

But that’s the whole point, of course. If the borrowers were actually forced to pay market prices to place debt, none of them could.

-Rolfe

this: http://www.storyofpakistan.com/articletext.asp?artid=A070

gets to it

Bangledesh wouldn’t be the 4th-World cataclysm that it is, and has been since it stopped being E. Pakistan..