"Typically you would build up a reserve during the halcyon days to protect yourselves during a recession," he said, calling the decision to stop collecting most premiums "a political one" that was pushed by banks and not based on strict accounting principles.
Of course the American Banking Association says it made no sense to pay into the FDIC during those 10 years because they had more than enough money. Congress, not surprisingly, agreed with them.
But James Chessen, chief economist of the American Bankers Association, said that it made sense at the time to stop collecting most premiums because "the fund became so large that interest income on the fund was covering the premiums for almost a decade." There were relatively few bank failures and no projection of the current economic collapse, he said.
"Obviously hindsight is 20-20," Chessen said.
House Financial Services Committee chairman Barney Frank agreed that officials believed at the time that the good times would last and that bank failures would not be a problem.
"We had this period where we had no failures," the Massachusetts Democrat said in an interview yesterday. "The banks were saying, 'Don't charge us anything.'"
At the end of 2008, the FDIC's insurance fund ratio was 0.40% of all insured deposits, far below the minimum 1.15% mandated by Congress.
"Now-needy FDIC collected little in premiums" [Boston Globe] (Thanks to Karl!)
(Photo: gruntzooki)
"We had this period where we had no failures," the Massachusetts Democrat said in an interview yesterday. "The banks were saying, 'Don't charge us anything.'"
And they didn't??!!?? That's like me saying, "I'm supporting myself, don't charge me Medicare taxes for now." Why does Big Business get away with the most retarded thinking, but if I "skip" a year of taxes, I'll go to jail??
]]>Human memory is very, very short. Plus, don't overlook the hubris people have towards the past..."Oh, we certainly wouldn't be as foolish as those people back then who let that bad thing happen. No no no, we're MUCH more sensible now..."
]]>1) Fannie and Freddie WERE NOT the root of the mortgage part of the current crisis. "Subprime" loans were the ones that were really the problem, and these were mostly financed by private investment that was chasing higher returns (subprime meant higher interest rates). It was not the "government" pushing people into home ownership that was the problem...it was the banks that were pushing the delusion that the higher returns from subprime mortgage-backed-securities came at little additional risk. No one forced banks to make lots of subprime loans - it was their greed that did that.
2) The reason why the crisis became SO BAD, and so systemic, and so persistent, is credit derivatives, not people failing to pay their mortgages. The reason the banks and insurers like AIG became insolvent is these derivatives, which they used to vastly overleverage themselves. Thank Phil Gramm for the legislation that allowed them to do this legally. Once it was made legal, the temptation to overleverage was overwhelming because it made for massively amplified gains in the short term. It also made for massively amplified risk, and it's STILL unwinding. This is the main reason the banks are still bleeding money.
3) The mortgage interest deduction doesn't really affect lower income borrowers as much because for smaller mortagages it won't exceed the standard tax deduction (or won't exceed it by very much). Actually, most of the money saved by taxpayers using the mortgage interest deduction is saved by higher income taxpayers. It's largely a subsidy for the rich.
Must I explain these things on every thread about this?
]]>This is exactly why we NEED to take down the Federal Reserve system. It is run by the bankers. The bankers don't see the need for any controls because they have everything under control: nothing to see here, move along. The whole financial melt down is due to the fact the bankers own our economy and we (the tax payers) allow them to do what they want: take our money. So from their point of view, paying money to the FDIC is ridiculous and it is in the sense they are effectively paying for something the tax payers could pay for instead.
]]>Sweet ComedY!
]]>Yeah, if you think THIS is bad, you should see what they're doing with social security. And medicare. And medicaid. And most federal, state, and municipal pension plans.
Those decisions were made with the knowledge that the parties responsible would never get blamed. Go American Government!
]]>But you might want to think twice about that- TD Bank, for instance, is Canadian.
]]>"1.15% of nationwide deposits is not nearly enough to cover one of them going down"
Actually, it very well might be. The issue is how far under the bank goes, and what priority the covered depositors take when funds are disbursed. It's not impossible to think that deposits covered by the FDIC would get paid out _first_ at 100%, and then everyone else gets to fight it out. By the numbers, 1.15% might very well cover everyone to $250k.
]]>Hmmmm......I wonder if my auto and home insurance company would let me not pay premiums since I have not made a claim in more than 10 years? And of course, if I needed to make a claim, they would just cover it based on the fact that they made so much money on me and never paid out anything........yeah right!
]]>I repeat they are all guilty, Democrat, Republican and Independent. Stop even thinking that this is partisan, it will only distract you from the bigger problem.
]]>I wonder why insurance companies continue to collect premiums on their policies. The above quote has to be the single most ignorant statement about insurance that I have ever read. We need to revive tar and feathering.
]]>Well, where else would banks get the money to get insane profits? By not paying the Government and not paying back their debts.
]]>There were relatively few bank failures and no projection of the current economic collapse, he said.
THAT'S THE F---ING POINT!
You plan for the bad stuff you see coming. Insurance is for the stuff you don't see coming. That's why it's insurance!
]]>I love pie, but my boyfriend prefers Red Velvet cake. I'd hate to have to leave him behind.
]]>@rainbowsandkittens
Whole life insurance works like this. They invest your premiums, and, eventually, if the investments work well, the interest on those invested premiums is enough to cover the annual cost of the insurance to you, so you don't have to invest premiums any more.
]]>1. Have FiOS Installed.
2. Wait.
Might have misunderstood the word 'mandated' there but... No, no I didn't, just seems they did.
]]>"We had this period where we had no failures," the Massachusetts Democrat said in an interview yesterday. "The banks were saying, 'Don't charge us anything.'"
"...and I, being the good politician I am, accepted their lobbying money and other political contributions and decided they must be right!"
]]>Then, when they learned about the subprime market crash they forgot about FDR's New Deal. Its all very simple and easy to understand, guys.
]]>(paraphrased)
"If I give you $100 'in case' some shit happens, and that shit doesn't happen... shouldn't I get my $100 back?"
Why didn't consumers do this?
It seems people followed the government - not saving any money, spending recklessly.
]]>The problem is that there are about 6-7 banks which have the vast majority of deposits. 1.15% of nationwide deposits is not nearly enough to cover one of them going down. That's part of why they're "too big to fail."
]]>Ever since the 60s the US government has been actively seeking to expand the number of people owning a home, which means expanding the number who take mortgages.
The biggest things to do this have been Fannie and Freddie, and the mortgage tax deduction.
The problem is that while you get some short term gains when you implement the programs, in the long run they drive up housing prices by the exact amount they're subsidizing them for. Eventually, that blows up, like it just did.
]]>oh yes. . . . .
]]>I'd love to say, "I haven't gotten into a car accident in the last ten years, so I'm a safe driver therefore I don't have to pay my car insurance premiums."
Can you imagine that despite not having paid your car insurance bill for two years, you total your car and they still cover you?!
Must be nice to be a 'corporate citizen.'
]]>They kind of BURIED THAT IN THE END THERE. So, do we trust this? All I have is my savings, do I need to invest in the mattress bank?
]]>When will the voters wake up and get rid of that loser?
]]>No shit, Sherlock...
]]>1. Get money
2. Hoarde money
3. Weasel government into not paying money
4. ????
5. Profit!
Barney Frank can cover the unpaid fees with money from UBS - Swiss account settlements.
]]>1. Go to Sleepy's and buy a bigger mattress.
2. Go to bank (online and brick & mortar) and withdraw money.
3. Cut open mattress.
4. Place all money into mattress.
5. Pray and cry.
]]>Tell me again why it was a good idea to pay off their gambling debts in addition to the depositor money they were also allowed to gamble with?
Our kids have to go hungry and without healthcare because these assholes colluded to raid the treasury? Something stinks here.
]]>Also, what happened to the "preview comment" button?
]]>@rainbowsandkittens: Hey yeah, i have paid into health care and haven't died yet, so i should be covered forever at this point, right?
]]>OK, I'm now all for raising the premiums as discussed earlier. Can we collect them this time?
]]>Amazing... thats exactly what they thought in the 20s... that 'prosperity' would never end.
Even more amazing is if we just had not broken all of FDR's 'Regulation' we wouldn't be in this mess. But ya, your right, FDR was just a horrible socialist that prolonged the depression. Oh, and the Holocaust didn't happen.
]]>Since my intended and I are to be wed on Pi day can we come? Sounds like a lovely place!
I can remember a time when I had a savings account of 6% return. *sigh*
]]>Wow, it's amzing how soon people get complacent and forget the past.
"House Financial Services Committee chairman Barney Frank agreed that officials believed at the time that the good times would last and that bank failures would not be a problem."
Because good times never EVER come to and end, do they? I think if the banks collapse now, they should pay the insurance directly out of the pockets of the idiots who thought this was a good idea and followed through.