President Obama, he of the 68% approval rating, asked Congress to allow bankruptcy judges to reduce the principal amounts of mortgages on primary residences (they can already modify almost all other loans in bankruptcy).
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Banks campaigned against the measure by - get this - threatening that it would destabilize financial markets.
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Translation: banks are weak; weak banks are dangerous; therefore Congress should not do things that might be bad for banks.
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Instead of bankruptcy cramdowns, the Times reports that the banks got a reduction in the insurance premiums they will pay the FDIC for deposit insurance - which is like a group of car owners voting themselves lower premiums on their auto insurance. But because there is zero chance the government will let insured depositors lose money, any shortfall in the premiums paid by banks to the FDIC will be made up by the taxpayer.
Not that this should surprise anyone.
Friday, May 01, 2009
All of us are belong to banks
The indespensible James Kwak tells us what is what:
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The Senate banking bill is humorous. Reduce the fee banks pay to FDIC for deposit insurance by 50%, make permanent the $250,000 level that was set during this crisis(a 150% payout increase). This is tantamount to an insurance company halving your home premium while simultaneously increasing your policy coverage from $300,000 to $750,000, during the middle of the worst tornado season in 100 years, for your home in tornado alley.
Ironic that your tax dollars will soon be liberated from those so called 'insured' accounts.
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