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your new nemesis

March 12, 2009 1:02 AM

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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.

2 replies

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March 12, 2009 11:02 PM

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@skizsrodt: I'm wondering about this logic, too. So if they don't pay in when times are good, when exactly are they supposed to pay in?

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kaceetheconsumer

March 12, 2009 6:25 PM

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@skizsrodt: And I guarantee you that it'll all happen again in another few decades.

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...\"

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pecan 3.14159265

March 12, 2009 1:05 AM

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That's it. I'm moving to my own island nation called Pecania, and I'm open to applications if anyone wants to come too. We'll all have to work for our money but if I decide the currency is pie, it'll at least be a yummy workplace across the island. Who's with me?

9 replies

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March 12, 2009 5:30 AM

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@pecan 3.14159265: Currency that you CAN eat...I second this idea.

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Oranges w/ Cheese hates what Christmas has become

March 12, 2009 3:25 AM

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@pecan 3.14159265: I'm suprised no one has called you out for starting up a communist (socialist OMG!) society! Heaven forbid something that *works* be implemented for once.

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pecan 3.14159265

March 12, 2009 1:57 PM

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@Oranges w/ Cheese: I said nothing about communism or socialism. Every country has to designate a currency. I choose pie as a proper bartering tool, but the actual metal or paper currency will probably be in the shape of a pie too...if the deal with Applekid goes through we might make apple pie the official pie of the island. And most likely Apple will make a killing off the island with product placement. And I plan on inviting a great deal of mathematicians to better organize national pi day.

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Gokuhouse

March 12, 2009 1:44 PM

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@Oranges w/ Cheese: If our government was socialist it would be an utter failure. Look how it works already. The FDIC is supposed to be mandated by congress, but it wasn't and now we are seeing why. Simply because congress is buddies with the big bankers and they let them do what they wanted to during the good years when they should have been paying their premiums to cover themselves now.

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Trai_Dep

March 12, 2009 2:39 AM

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@pecan 3.14159265: Depends. Will there be a geometry quiz before citizenship is granted?

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custommadescare

March 12, 2009 2:58 AM

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@Trai_Dep: Maybe instead of geometry, you have to prove you can balance a checkbook!

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pecan 3.14159265

March 12, 2009 1:54 PM

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@custommadescare: Balance a what? :-P There are a few stipulations for citizenship...one of them being that you must have car insurance and pay off your credit card bills in full. We're not having shenanigans with borrowing and carrying over balances.

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Applekid

March 12, 2009 2:01 AM

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@pecan 3.14159265: Applia will not stand for your obvious ploy to bulk your numbers and institute a draft. We are voting on whether or not a preemptive strike is necessary.

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pecan 3.14159265

March 12, 2009 1:51 PM

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@Applekid: How about we just combine our forces and take over Orangerine over there? Orange and Tangerine combined forces, why not form the rechristened Pecanplia? Pecapplia? It's starting to sound like a drug.

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From the cubicle of PGibbons

March 12, 2009 1:56 AM

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@pecan 3.14159265: Make Mine Pecan.

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March 12, 2009 1:15 AM

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@ pecan 3.14159265

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*

1 replies

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pecan 3.14159265

March 12, 2009 1:57 PM

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@tashiking: The more the merrier! Will you be serving pie at your nuptials?

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rainbowsandkittens

March 12, 2009 1:16 AM

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I kind of like this logic. I mean, I've paid homeowners insurance for a good long time and it hasn't caught on fire so far--so they should just be content with the money they have collected and continue to cover my risk free of charge.

2 replies

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March 12, 2009 7:57 AM

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@rainbowsandkittens: I subscribe to Chris Rock's idea of insurance:

(paraphrased)
\"If I give you $100 'in case' some shit happens, and that shit doesn't happen... shouldn't I get my $100 back?\"

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your new nemesis

March 12, 2009 1:30 AM

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@rainbowsandkittens: Hey yeah, i have paid into health care and haven't died yet, so i should be covered forever at this point, right?

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LJKelley

March 12, 2009 1:22 AM

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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.

3 replies

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huadpe

March 12, 2009 5:25 AM

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@LJKelley: The problem wasn't so much the deregulation, it was the massive governmental pressure to give out mortgages.

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.

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johnva

March 12, 2009 3:21 PM

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@huadpe: I know this is an approved talking point, but it's basically a lie. The bankers are using that lie to try to deflect criticism and shift the blame from their own spectacular failure. And the GOP is carrying water for them because they see an opportunity to smear Obama unfairly.

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?

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March 12, 2009 7:57 AM

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@huadpe: Everyone knows the people in charge are like Kelly Bundy. When they learn something new, they forget something they already knew. This means that when the people running the banks learned how to exploit the subprime market they forgot about the market crash of 1929.

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.

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March 12, 2009 1:24 AM

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OK, I'm now all for raising the premiums as discussed earlier. Can we collect them this time?

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Neo-Senku: The World's Finest Pervert

March 12, 2009 1:27 AM

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No one in their right mind would think that this is a good idea. Everything is fine so no need to prepare for the worst. dumb, just dumb.

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March 12, 2009 1:31 AM

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Stupid English Major question: if \"interest income on the fund was covering the premiums,\" then how is the fund coming up short?

Also, what happened to the \"preview comment\" button?

2 replies

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huadpe

March 12, 2009 5:29 AM

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@magic8ball: The fund was required to have 1.15% of deposits. Because deposits weren't growing (we weren't saving anything), it didn't take very much money coming in to keep it at 1.15%, and since banks weren't failing, money wasn't leaving. So the banks didn't have to pay in to keep the fund at where it was supposed to be.

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.\"

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Erwos

March 12, 2009 12:46 PM

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@huadpe: I'm going to take issue with one thing you said:

\"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.

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March 12, 2009 1:38 AM

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This sounds similar to those who want the gov't to release oil from our strategic reserves when the price of gas shot up. I think with FDIC fee's and adding oil to the SPR we should stay consistent, payting/adding during the good times and the bad

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bohemian

March 12, 2009 1:39 AM

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Mind boggling. Absolutely mind boggling. Even in light of all of the bizarre and greedy things that have been exposed lately this one takes the cake.

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From the cubicle of PGibbons

March 12, 2009 2:06 AM

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Ah, yet another \"Miracle of the Marketplace\" idea proves its worth. I guess the Savings and Loan larceny was just a blip (that we are STILL paying off)?

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.

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Pixelantes Anonymous

March 12, 2009 2:06 AM

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Idiocracy is a documentary.

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humphrmi

March 12, 2009 2:17 AM

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Figures. Barney Frank. He doesn't understand the difference between common and preferred stock in the BofA compensation issue, but he does know that we shouldn't have saved up for a rainy day. Can this guy lose any more credibility?

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March 12, 2009 2:17 AM

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Do they not know about saving for a rainy day. I mean there was article about this just today.

[consumerist.com]

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Matthew Broder

March 12, 2009 2:19 AM

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List of chores for tomorrow:

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.

1 replies

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I♥Hannah_GitEmSteveDave

March 12, 2009 10:10 AM

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@Matthew Broder: 6. Grab as many towels as I can, b/c it was a water bed.

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March 12, 2009 2:19 AM

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No problem.

Barney Frank can cover the unpaid fees with money from UBS - Swiss account settlements.

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Eldritch

March 12, 2009 2:22 AM

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I feel like the banks had this sort of business model:

1. Get money
2. Hoarde money
3. Weasel government into not paying money
4. ????
5. Profit!

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March 12, 2009 2:34 AM

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\"Obviously hindsight is 20-20,\" Chessen said.

No shit, Sherlock...

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March 12, 2009 4:12 AM

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So where can we find the campaign contribution list of the American Bankers Association and its members? It should probably make some interesting reading just like the list of Freddie and Fannie contributions.

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March 12, 2009 4:34 AM

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Teflon Barney Frank dodges another bullet. That guy's fingerprints are all over the bloody knife that killed our economy.

When will the voters wake up and get rid of that loser?

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BytheSea

March 12, 2009 4:51 AM

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From the article: \"The FDIC has never failed to make good on its promise to pay for the insured deposits when a bank fails, and officials said that will not change.\"

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?

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howtragic

March 12, 2009 4:55 AM

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Man, I am so naive, I really honestly believed that when my banked claimed to be FDIC insured, that meant they were paying a premium for that insurance. Sort of like how I pay premium for all my insurance policies. I really cannot believe how ignorant I was. How could I have been so mistaken?

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nygenxer

March 12, 2009 4:58 AM

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1996-2006, huh? There was the Asian banking crisis and then we bailed out the entire country of Mexico. And wasn't this just ten years after the $300B S&L scandal?

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.'

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March 12, 2009 5:07 AM

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and just who was in charge that decade? and what party dominated congress?

oh yes. . . . .

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nygenxer

March 12, 2009 5:21 AM

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Well for one thing, the money is not growing and it needs to grow simply to keep up with inflation.

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March 12, 2009 6:19 AM

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Put money away during calm days so you're safe on a rainy day?

Why didn't consumers do this?

It seems people followed the government - not saving any money, spending recklessly.

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March 12, 2009 6:29 AM

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Practical question:
How hard would it be to open an account at a Canadian bank for an American. I know they even have US dollar accounts.

2 replies

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March 12, 2009 1:27 PM

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@N.RobertMoses: I know that I have a Chinese bank account now. If they're any indication of opening foreign accounts for Americans in general, it's just a couple of forms and your passport number.

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March 12, 2009 1:28 PM

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@jamar0303: Not to say, of course, that Canadian banks are the same as Chinese ones, but that there's no reason for Canadian banks to be any tougher to open accounts at than Chinese banks.

But you might want to think twice about that- TD Bank, for instance, is Canadian.

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Canino

March 12, 2009 9:43 AM

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\"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!\"

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Onouris

March 12, 2009 10:27 AM

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So, there's a government mandated payment to the FDIC and everyone just decided nah tell you what, let's not pay that.

Might have misunderstood the word 'mandated' there but... No, no I didn't, just seems they did.

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Anonymous

March 12, 2009 10:28 AM

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I like that idea for my own insurance needs--auto liability, health. Been driving 30+ years with no accidents, currently healthy. How about I don't pay premiums since my future looks so rosy based on my past? Hmmph. They didn't even look at their past to before passing on premiums. Hey, no premiums to pay? More money to funnel into CDOs, executive bonuses, buying up questionable assets [Countrywide, Merrill Lynch--I'm look at you BofA!]

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March 12, 2009 11:07 AM

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It's a new paradigm! The good times will never end! Stocks will go up forever! There is no longer a downside!
Famous last words.

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March 12, 2009 11:12 AM

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@rainbowsandkittens: \"it hasn't caught on fire so far\"

1. Have FiOS Installed.
2. Wait.

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March 12, 2009 11:48 AM

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@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.

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March 12, 2009 11:55 AM

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Will you accept citizens of all confectionary preferences?

I love pie, but my boyfriend prefers Red Velvet cake. I'd hate to have to leave him behind.

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Rectilinear Propagation

March 12, 2009 11:55 AM

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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!

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March 12, 2009 11:56 AM

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So I guess I really don't need flood, fire, liability, or theft insurance on my personal stuff. After all, who would have EVER thought...

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March 12, 2009 12:21 PM

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[www.nytimes.com]

Well, where else would banks get the money to get insane profits? By not paying the Government and not paying back their debts.

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March 12, 2009 12:26 PM

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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.\"

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.

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March 12, 2009 12:31 PM

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People, it isn't Barney Frank, he is one congressman, out of over 500. They were all in on it. Every last stinking one of them. And don't forget the Executive Branch, they run all of the agencies that were supposed to go to congress and say, \"Those guys are full of beans, just ignore them\" Instead consumer protection agencies became the toads of big business. That is directly related to the Bush Admin. ideas about policy.

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.

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CaptZ

March 12, 2009 12:45 PM

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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!

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Anonymous

March 12, 2009 1:12 PM

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Soooo . . . let me get this straight, I don't have to keep paying my homeowners insurance premiums because my house is not currently on fire? These people (the bankers and the congressmen who listened to them) should be fired _today_.

1 replies

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orlo

March 12, 2009 11:12 PM

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@SeeratTubero: At least they were benefiting their banks, unlike their no or negative down payment mortgages

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March 12, 2009 1:29 PM

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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!

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NICU

March 12, 2009 1:44 PM

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I love this quote from your summary:
\"in the event it would someday have to bail out a bunch of stupid losers who confused banking with alchemy.\"
That's the best summary of the banking crisis.

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Mr_Human

March 12, 2009 1:53 PM

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Idiots

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tworld

March 12, 2009 2:21 PM

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Wasn't Bushbutt reigning for most of those ten years?

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March 12, 2009 2:36 PM

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\"bail out a bunch of stupid losers who confused banking with alchemy\"

Sweet ComedY!

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March 12, 2009 3:06 PM

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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.

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March 12, 2009 3:17 PM

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@pecan 3.14159265: If you bake your own pie, is that considered counterfeiting?

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Trai_Dep

March 12, 2009 3:26 PM

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After reading the comments from the RedStaters here, I've learned that, from 1996 thru 2006, when the Republicans ruled Congress in their tight-fisted, larcenous, multiple-felony-indicted fists, Barney Frank was kindly put in charge of the House by grateful Republicans.
That's so bi-partizan of them!!

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Brandon Hanks

March 12, 2009 5:26 PM

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One year in college I failed to pay rent. Guess what happened? Eventually the landlord demanded I pay for delinquent amount due plus penalties. I cashed out savings that I should not have and paid off the amount owed plus penalties. Where was my free pass? Banks need to own up to there contractual obligations. Can we sue our banks for not paying the premium to insure deposits?

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RStui

March 12, 2009 7:31 PM

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\"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??

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Hybriddeathdealer

March 12, 2009 9:04 PM

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PAC Money *IS* the Root of ALL Evil...
Eliminate campaign funding by all, except those within a district. End all lobbying. Open all hearings and all hearing findings to the public, with the exception of matters of true National security.
Consumers can vote as Independent *Americans* and not as political party flag wavers, that excuse bad behavior on all sides of the isle.
Truth is truth, our country has forgotten that and we are addicted to our own lies...

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Craysh

March 15, 2009 2:59 AM

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True, he IS only one in 500, but he was adamant that there was nothing wrong with the banking institution when they were trying to preempt the problems that were coming in the 2006 hearings.
He's one of the major reasons that the they couldn't get legislation through to prevent the collapse.

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