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Guest_chris c-t_*

Fdic Is Bust

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I have managed to get a rather interesting document from the FDIC.

I don't think they wanted us to see this...

http://www.scribd.com/full/20379069?access...httwuigbh659003

Page 3:

Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September30, 2009, will be negative.

...

Staff has also projected the Fund balance and reserve ratio for each quarter over the next several years using the most recently available information on expected failures and loss rates ... Staff projects that, over the period 2009 through 2013, the Fund could incur approximately $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010. Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009.

...

If the board imposes no further special assessments and leaves existing risk-based assessment rates in place, staff projects that the Fund balance would become significantly negative in 2010....

...

Staff's current projection of $100 billion in failure costs from 2009through 2013 is higher than staff's projection in May of $70 billion over the same period...

...

Asset quality problems among insured institutions are not expected to abate in the near-term.

...

Staff's projections take into account recent trends in resolution methodologies, such as the increasing use of loss sharing--especially for larger institutions--which reduce the FDIC's immediate cash outlays...

...

If the FDIC took no further action under its existing authority to increase its liquidity, the FDIC's projected liquidity needs would exceed its liquid assets on hand beginning in the first quarter of 2010. Through 2010 and 2011, liquidity needs could significantly exceed liquid assets on hand.

...

PAGE 5:

...

Imposing an additional special assessment as provided for in the May 2009 final rule would bring in approximately $5.5 billion in revenue to the Fund; imposing two (one at the end of September, one at the end of December) would bring in approxmately $11 billion in revenue. Given staff's projections, neither amount would prevent the Fund from becoming significantly negative of prevent the Fund's liquidity needs from exceeding its liquid assets on hand in 2010.

...

Even combining these special assessments with higher risk-based assessment rates would not solve these problems...

I hope I don't get in trouble for this. Me, a hacker?? ;)

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It has been reported in the mainstream press that the FDIC want banks to prepay for the next 3 years:

http://news.bbc.co.uk/1/hi/business/8281375.stm

The Federal Deposit Insurance Corporation (FDIC), which controls the US banking sector, is calling for more cash to insure against failing banks

The FDIC wants banks to pre-pay fees for the next three years upfront, boosting its coffers by $45bn (£28bn).

This would help to cover potential losses at banks that might go bust as a direct result of bad loans during the financial crisis.

Ninety-five US banks have already gone under this year.

"First and foremost, bank customers should know that their insured deposits have and always will be 100% safe, no matter what," said FDIC chairman Sheila Bair.

"In choosing this path, it should be clear to the public that the industry will not simply tap the shoulder of the increasingly weary taxpayer."

The FDIC said that these pre-payments would not impact banks' ability to lend money to businesses and individuals.

It said that banks held $1.3tn of assets at the end of June, a 22% increase on the amount they held a year earlier.

The FDIC insures each bank account at a failed bank for up to $250,000.

Edited by up2late

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The grammer, spelling and layout are rather poor.

Did you cut and paste, or has somebody had to type it out by hand at some point?

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The grammer, spelling and layout are rather poor.

Did you cut and paste, or has somebody had to type it out by hand at some point?

Arf.

Sorry im not the police, but couldnt resist.

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Arf. Sorry im not the police, but couldnt resist.

:P That kind of makes my point.

The OP's document looks like it was typed in a hurry by a single person, and not proof read.

Just like my post.

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:P That kind of makes my point.

The OP's document looks like it was typed in a hurry by a single person, and not proof read.

Just like my post.

Read the link for yourself then (post #1) or see zero hedge :

my link to .pdf:

http://www.scribd.com/full/20379069?access...httwuigbh659003

http://www.zerohedge.com/article/fdic-disc...nd-now-negative

Edited by chris c-t

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I have managed to get a rather interesting document from the FDIC.

I don't think they wanted us to see this...

Well done that man. :)

I know there was talk of them running out of money, obviously this will stop that ridiculous talk of the QE tarp thingy stopping in October then. ;)

wonder what this will do to the markets then ?

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http://www.nytimes.com/2009/09/30/business...mp;ref=business

Acknowledging that they greatly underestimated the problems plaguing the nation’s banking system, federal officials proposed a plan on Tuesday to replenish the fund that protects bank depositors.

They also announced that the fund, which began the year with more than $34 billion on hand but has been battered by bank collapses, would fall into deficit this week.

The plan proposed by the Federal Deposit Insurance Corporation would, in effect, have the nation’s banks collectively lend money to the insurance fund by requiring the banks to prepay this year the annual assessments that they would otherwise have been due through 2012.

If adopted, the plan would raise $45 billion from the banks to replenish the fund, which is suffering severe problems with both its capital and liquidity.

Officials said that the plan would be less expensive than a direct loan from the banks — an idea that many banks supported — because no interest would have to be paid and because the plan would not be voluntary. In addition, the banks would face an increase in their annual assessments beginning in 2011 of 3 cents for every $100 in deposits. The healthiest banks now pay 12 cents to 16 cents on every $100.

Created during the 1930s to restore confidence and arrest a wave of bank runs that contributed to the Great Depression, the insurance fund now stands behind some $4.8 trillion in deposits. It is financed by the industry and backed by the United States. Officials have the ability to borrow $100 billion from the Treasury immediately, and up to $500 billion with the approval of the Treasury secretary and the Federal Reserve.

The plan proposed by the deposit insurance agency was a partial victory for industry executives and lobbyists, who fought against the idea of levying another special assessment on the banks. Last May, an additional 5 cents was collected for every $100 in deposits as a special assessment on top of the regular premiums.

The plan proposed by the deposit insurance agency was a partial victory for industry executives and lobbyists who fought against the idea of another special assessment imposed on the banks. Last May, the government imposed a special assessment of 5 cents for every $100 in deposits on top of the regular premiums.

The prepayment option also offers a significant bookkeeping benefit to the industry. If the plan is ultimately approved, banks will be able to list the prepayment as an asset on their books, and not charge it against earnings until the time when the payment would normally have been due.

“The decision to not impose any additional assessment for 2009 but rather to require institutions to prepay assessments over the course of three years, while accounting for such expense on a quarterly basis is a positive alternative to rebuilding the deposit insurance fund while not impacting an institution’s earnings,†said Steve Bartlett, president of the Financial Services Roundtable, which represents 100 of the nation’s largest financial services companies.

Does this mean that FDIC will be liable for interest on these loans??? If they are prepaying how can it be a loan?

Although love the opening paragraph the best of the best underestimated the banking crisis.

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http://www.bloomberg.com/apps/news?pid=206...id=aidlDq7Z4Yyk

The Federal Deposit Insurance Corp. proposed asking banks to prepay three years of premiums to replenish reserves dented by a rash of bank failures that the agency said will cost $100 billion through 2013.

The insurance fund will run a deficit as of tomorrow after 120 banks failed in the past two years, the agency said today. Half the costs from seized banks have been incurred already and prepaying the fees will raise $45 billion, the FDIC said. The agency rejected options for a second special fee or borrowing from the Treasury Department.

“What we are proposing to do is to tap the ample liquidity of the banking industry to improve our own liquidity position without borrowing from the Treasury,†FDIC Chairman Sheila Bair said at a Washington board meeting. The agency raised its five- year loss estimate by 43 percent.

The agency is required by law to rebuild the fund when the reserve ratio, or the balance divided by insured deposits, falls below 1.15 percent. It was 0.22 percent on June 30. The fund, drained by 95 bank failures this year, had $10.4 billion at the end of the second quarter. The fund will erase its deficit by 2012, the staff said.

The proposal approved by the board requires banks to pay premiums for the fourth quarter and next three years on Dec. 30.

The board backed prepayments over alternatives such as borrowing taxpayer dollars from the Treasury, charging the banking industry a special fee in addition to levies they already pay and borrowing directly from the banks.

John Dugan, the head of the U.S. Office of the Comptroller of the Currency, said he was pleased the agency proposal didn’t impose another special assessment this year and next year.

Assessment Opposition

“For banks that were already feeling the effects of a weak economy, special assessments could only make them weaker,†said Dugan, a member of the five-person FDIC board.

Under the proposal, the FDIC wouldn’t impose another special assessment this year. The agency would raise assessments by 3 basis points in 2011.

The FDIC will seek public comment until Oct. 28 and then make a decision on its approach.

The FDIC raised its projected fund losses, from $70 billion in May, because the assets and number of failed and “problem†banks have increased, said Arthur Murton, director of the FDIC’s division of insurance and research. Bank failures will peak this year and 2010, he said.

The banking industry lobbied against a special fee that would be added to the regular annual premium, telling the FDIC and Congress such a levy would hurt their ability to raise capital. The industry welcomed the FDIC’s proposed approach.

Bloombergs take on it.

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