But here's a rather bit of commentary, courtesy of The Big Picture:
What kind of recovery, we wonder, permits the sixth largest bank failure in U.S. history? Colonial BancGroup, the flailing Montgomery lender that had 346 branches spread across Florida, Alabama, Georgia, Nevada, and Texas, joined 77 other banks so far in 2009 to find their way into the big bank home in the sky.
...
Says Sheila Bair, chairman of the FDIC, “The past 18 months have been a very trying period in the financial services arena.”
Consider that a sizable understatement. Last year, during what was considered the height of bank failures, the agency set aside $25 billion to cover what they saw as potential future losses. Now, less than 12 months later, the number of banks on the FDIC’s “troubled” watch list has jumped from 90 to no less than 305. The combined asset value of those “problem” banks? $220 billion.
Yarg.
I know the FDIC isn't running out of money any time soon, but a climate where banks keep imploding cannot be a good thing.
Peter Schiff is fond of saying that the FDIC is bad because it shields investors from risk. Logic being, if banks tanked, we'd be more careful where we put our money.
Problem with that is people don't want to have to suss out which banks are healthy and which aren't. And if people have trouble divining which banks are and aren't healthy now, wait until they have to worry about deposits under $200K fleeing to safer harbors.
I'm sure Uncle Sam will keep kicking out the cash to cover these kinds of takeovers - but you wonder if the rate continues to increase like this... what kind of course corrections will have to follow?
2 comments:
Me thinks that FDIC shields banks from risk more than it does 'investors'. Just exactly who would have left money in a bank 1 year ago sans FDIC?
In the end it almost certainly protects more good banks than bad. Seems the issue is more with its authority or lack thereof. Seems the FDIC needs the approval of the state the bank is in to take over or otherwise act. One issue among many...
Very true.
I mean - I think the FDIC prevents a viscous cycle that's pretty much bad for everyone.
One of those situations where the banks get cover, but we get cover, too.
Peter Schiff hates the FDIC with a passion, but then he's on that whole Austrian school kick. Makes you wonder.
I didn't realize that the FDIC needs a state level nod before moving in - that seems odd, given that whole Federal supremacy mindset.
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