FDIC takeover - Mercedes-Benz Forum

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post #1 of 20 (permalink) Old 03-23-2009, 12:33 PM Thread Starter
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FDIC takeover

From the FDIC site,
Quote:
Mission
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress that maintains the stability and public confidence in the nation’s financial system
by
insuring deposits,
examining and supervising financial institutions, and
managing receiverships.
From the announcement today
Quote:
Using FDIC Expertise to Provide Oversight:
The FDIC will provide oversight for the formation, funding, and operation of these new funds that will purchase assets from banks

Joint Financing from Treasury, Private Capital and FDIC: Treasury and private capital will provide equity financing and

the FDIC will provide a guarantee for debt financing issued by the Public-Private Investment Funds to fund asset purchases.

The Treasury will manage its investment on behalf of taxpayers to ensure the public interest is protected. The Treasury intends to provide 50 percent of the equity capital for each fund, but private managers will retain control of asset management subject to rigorous oversight from the FDIC.
A total takeover of a supposedly independent agency.

In case anyone's wondering what receivership means
Quote:
Receivership
Law Encyclopedia
A court order whereby all the property subject to dispute in a legal action is placed under the dominion and control of an independent person known as a receiver.

Last edited by mlfun; 03-23-2009 at 01:09 PM.
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post #2 of 20 (permalink) Old 03-23-2009, 01:02 PM
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Is it not FDIC insured by AIG?

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post #3 of 20 (permalink) Old 03-23-2009, 01:28 PM
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Just how long did you think that banks could be allowed to "just fail" before their insurance backing would also start to morph.

You are one of the ones that has been calling for the banks to just 'be allowed to go bankrupt and fail'.

Welcome to the FIRST result.




There will be more. And they will be worse.

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post #4 of 20 (permalink) Old 03-23-2009, 02:15 PM
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Agreed with mcbear.

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Originally Posted by Stryker-1999 S600 View Post
the comparison between a V8 and a V12 isn't a decision, it's an opportunity.
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post #5 of 20 (permalink) Old 03-23-2009, 02:25 PM Thread Starter
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Quote:
Originally Posted by mcbear View Post
Just how long did you think that banks could be allowed to "just fail" before their insurance backing would also start to morph.

You are one of the ones that has been calling for the banks to just 'be allowed to go bankrupt and fail'.

Welcome to the FIRST result.

There will be more. And they will be worse.
Since when is the FDIC responsible for insuring private mortgage investment funds ?
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post #6 of 20 (permalink) Old 03-23-2009, 02:26 PM
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The FDIC should have handled it ALL in the first place, they are used to dealing with failing banks and would have handled all the executive compensation and other issues as a matter of course, but then, if we had done it that way Paulson and Bush would not have been able to protect the fortunes of their fat cat pals.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

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post #7 of 20 (permalink) Old 03-23-2009, 03:02 PM Thread Starter
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Alternative plan

Quote:

Geithner and Summers have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve (Fed) to subsidize investors to buy toxic assets from the banks at inflated prices.
...
The plan should not go forward on such unfair terms. Under the law, Congress should apply the Federal Credit Reform Act of 1990, which requires budget appropriations to cover expected losses on government loans programs, which would presumably include the expected losses on FDIC and Treasury loans under the Geithner-Summers Plan.
With proper credit accounting, the entire operation in our little illustration would require a budget appropriation of $276 billion, equal to the expected losses of the FDIC and Treasury. If the Administration goes to Congress for such an appropriation it will be shot out of the water. The public will not accept overpaying for the toxic assets at taxpayers' expense. Thus, it is very likely that the Administration will attempt to avoid Congressional oversight of the plan, and to count on confusion and the evident "good news" of soaring stock market prices to justify their actions.

The Geithner-Summers plans for the FDIC are not the only off-budget transfers to bank shareholders taking place. Other parts of the plan support subsidized loans from the Treasury and, even more, from the Fed. The Fed is already buying up hundreds of billions of dollars of toxic assets with little if any oversight or offsetting appropriations. Since the Federal Reserve profits and losses eventually show up on the budget, the Fed's purchases of toxic assets also should fall under the Federal Credit Reform Act and should be explicitly budgeted.

There are countless preferable and more transparent courses of action.

The toxic assets could be sold at market prices, not inflated prices, making the bank shareholders bear the costs of the losses of the toxic assets.

If the banks then need more capital, the government could invest directly into bank shares. This would bail out the banking system without bailing out the bank shareholders. The process would be much fairer, less costly, and more transparent to the taxpayer.

Banks that are already insolvent should be intervened directly by the FDIC, that is, temporarily taken into receivership. The shareholder value would be wiped out, except perhaps for some residual claims in the event that the toxic assets vastly outperform their current market expectations. As I've written before, the allocation of bank shares between the taxpayers and the current bank shareholders could be make contingent on the eventual value of the toxic assets (Jeffrey Sachs: A Proposal on How to Clean Up the Banks), ensuring fairness between the shareholders and the taxpayers.
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post #8 of 20 (permalink) Old 03-23-2009, 03:23 PM
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A total takeover of a supposedly independent agency.
it reads like it's the other way around man. this private entity will be in charge of taxpayers money and not the other way around...



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post #9 of 20 (permalink) Old 03-23-2009, 03:34 PM Thread Starter
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Quote:
Originally Posted by mzsmbs View Post
it reads like it's the other way around man. this private entity will be in charge of taxpayers money and not the other way around...
Yes, the Treasury is indeed a private entity.
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post #10 of 20 (permalink) Old 03-23-2009, 04:27 PM
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Quote:
Originally Posted by mlfun View Post
Since when is the FDIC responsible for insuring private mortgage investment funds ?
Since you didn't provide a LINK to your post I will just assume there were no edits in this sentence: "Joint Financing from Treasury, Private Capital and FDIC: Treasury and private capital will provide equity financing and the FDIC will provide a guarantee for debt financing issued by the Public-Private Investment Funds to fund asset purchases."


So, I guess NOW would be the answer to your question. Remember when we kept talking about interwoven.

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