tag:blogger.com,1999:blog-14963913.post2001563682882611531..comments2023-10-27T20:27:57.900-04:00Comments on Kid Dynamite's World: The Truth - Courtesy of the FDICKid Dynamitehttp://www.blogger.com/profile/17475987512856310577noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-14963913.post-15441006927223220212009-09-30T14:13:44.927-04:002009-09-30T14:13:44.927-04:00KD,
Sorry, I misquoted when I said look at the st...KD,<br /><br />Sorry, I misquoted when I said look at the statement. The relevant quote I was talking about was taken from the WSJ's breakdown of the board meeting that took place yesterday. The link is here: http://blogs.wsj.com/economics/2009/09/29/key-points-on-fdic-proposal-for-prepayment-of-fees/<br /><br />Point 8 is what I was referencing earlier. <br /><br />At the end of the day, it's a matter of cash/liquidity. A special assessment is cash in the door to the FDIC, but it is not fully in the door until the end of the quarter, when assessments are due and banks recognize them on their financial statements/earnings reports. <br /><br />So, the FDIC has $30 billion in cash already set aside for the anticipated failures for the rest of the year and in early 2010. By charging another special assessment, they directly hit the banks' equity, and I'm guessing they still wouldn't have enough cash on hand to deal with the upcoming failures.<br /><br />However, by getting the banks to prepay for a few years, they actually get three years' worth of cash in the door sooner, and so can deal with the failures through 2010. More cash on hand means they have a better ability to cope with anticipated receiverships.<br /><br />I don't think the solvency of the fund is an issue anymore. If you read the WSJ link I posted above, the fund is expected to stay in the red even with the prepayment, albeit because of "accounting issues." Like I said earlier, it now comes down to whether or not there is enough cash on hand. IMO, this situation is a lot better than direct borrowings from the banks, which means the agency paying interest to the banks at the discretion of the Treasury Sec.Anonymoushttps://www.blogger.com/profile/07905353942355111371noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-12736846861343252372009-09-30T09:11:01.604-04:002009-09-30T09:11:01.604-04:00huh? no no... i read the full statement - i even p...huh? no no... i read the full statement - i even pulled the relevant quote for you - the reason they don't want to do a special assessment is because they don't want to put "Stress" on the banks. <br /><br />you do understand, Abhinav, that prepaying future fees does nothing to help the solvency of the fund right? repeat after me: pulling forward (demand: cash for clunkers, $8k homebuyer tax credit, or fees: Banks prepaying FDIC fees) does NOT solve anything.<br /><br />The correct analogy is if you live in a Co-Op. when the Co-op needs money, they don't have you prepay your future monthly fees - that doesn't help - those fees are for expenses that are bound to come up. they hit everyone with a special assessment to replenish the fund. that's how you fix the finances.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-85410216626780687952009-09-30T09:03:49.685-04:002009-09-30T09:03:49.685-04:00Actually, if you read the full statement by the FD...Actually, if you read the full statement by the FDIC, they specifically state that charging another Special Assessment won't help anyway because the fund will still remain "significantly negative." Unfortunately, the action you recommend isn't feasible either. So it's either have them prepay, borrow directly via notes or borrow from Treasury (aka the Taxpayer). Which would you prefer, KD?Anonymoushttps://www.blogger.com/profile/07905353942355111371noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-35949175926701412342009-09-30T08:48:52.484-04:002009-09-30T08:48:52.484-04:00anal_yst - i don't have your email!
the way t...anal_yst - i don't have your email!<br /><br />the way they do that, though, is because they have more than one bank charter i think. Ie, for Citi, they have Citi N.A., and Citi South Dakota, and Citi New York or something like that. so in their "bank deposit program" you can break your money into FDIC guaranteed chunks in each "bank" within Citi.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-35843691408246530962009-09-30T01:06:28.238-04:002009-09-30T01:06:28.238-04:00I'm not exactly sure how (possibly just a shit...I'm not exactly sure how (possibly just a shit ton of subsidiary banks) but the big boys (e.g. Shitibank) are extending basically unlimited FDIC coverage on bank deposits. I don't know how it works, the people @ my firm who deal with that crap don't know how, and the FDIC website blows donkey dick. Perhaps this is something you want to investigate (shoot me an email if ya wanna discuss further).Unknownhttps://www.blogger.com/profile/09977348430224287393noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-47442066215113624322009-09-29T23:19:09.660-04:002009-09-29T23:19:09.660-04:00http://www.calculatedriskblog.com/2009/09/citi-sti...http://www.calculatedriskblog.com/2009/09/citi-still-using-fdic-tglp.html is the linkKid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-49561123303799811372009-09-29T23:18:38.915-04:002009-09-29T23:18:38.915-04:00wait - my head is spinning - i just found out Citi...wait - my head is spinning - i just found out Citibank issued new debt under the FDIC's TLGP program - in other words - debt guaranteed by the FDIC.<br /><br />to summarize: Citi issues debt guaranteed by the FDIC, which is broke. they use the proceeds to prepay dues to the FDIC, which the FDIC then uses to guarantee the debt Citi just issued. #/NA circular reference!Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-36797903054515291172009-09-29T14:36:04.733-04:002009-09-29T14:36:04.733-04:00Very well said, KD. It's like the change to m...Very well said, KD. It's like the change to mark-to-market accounting rules earlier this year -- the administration would do anything in this country rather than something which makes clear just how bad off our banks are right now.Hammer Player a.k.a Hoyazohttps://www.blogger.com/profile/17031535857121915911noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-70759333482031758992009-09-29T12:03:50.825-04:002009-09-29T12:03:50.825-04:00imporatant to have everyone pay for the bailout - ...imporatant to have everyone pay for the bailout - it's part of our new Socialist country RATCHEESEAnonymousnoreply@blogger.com