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\"Fortunately, the FDIC is backed by the full faith and credit of the United States government... so even if they run out of cash, we can just print some more!\"
WOW, how magical!!! I'm sure there can't be any negative consequences from irresponsibly printing new money!
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You're missing a VERY important part of the story.
The FDIC has not collected premiums from banks in 10 years as they were flush with cash and the Senate thought a failure was not possible. So they've waived the contributions that banks were required to make.
Read between the lines and you'll discover big banks pressuring their bought-and-paid cronies in the Senate and Bush White House to let them keep the cash instead of putting it into the FDIC.
The shortfall is now being paid for by the Treasury -- not the banks who owe it. So the consumer is paying for FDIC TWICE. Once for the fees paid to the bank, which were never given to the FDIC, and again as a taxpayer.
I am all for bank regulations and in my book the FDIC is an institution that should be protected and held to the highest standard. But I dare anyone to find and insurance company who pays your claim even though you stopped paying premiums 10 years ago. The FDIC needs a divorce from the Senate.
@HiPwr: No, the rules were relaxed by the Senate banking committee (of which Barney Frank and Kennedy were BOTH for relaxing the rules and are just as to blame), but it was also strongly championed by the Fed Reserve and Treasury -- both of which directed by the White House.
So, thanks for trying to pin me as a brainless-Bush-blamer, but in this case, his administration was just as culpable as the Senate.
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@meechybee: That's why you'll rarely see me hyping the Dems, btw. It's bigger than parties.
Although, it must be said, had Frank or Kennedy voted no, the bill still would have passed, and they'd probably have been slain by Wall Street interests the next election, for naught.
But yeah: ideologies, not parties, are the correct scale to focus.
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@HiPwr:
I'm not quite sure I get this anyway. If the premiums haven't been collected in 10 years, and Bush was in office for 8...err...time machine?
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@henwy: It is all Bush's fault. And he managed it despite the vehement objections of the Democrats when the Republicans controlled Congress and even when the Democrats controlled Congress. And yes, as you point out, he even managed to do it while Clinton was in office.
For such an idiot, he sure knows how to get things done.
As long as people like Trai_Dep waste all of our time assigning blame (sometime rightfully, sometimes not), I don't see how we are going to work out the mess this country is in.
How do we get past being \"conservative\" and \"progressive\" and just be Americans?
@HiPwr: It's because I'm jealous, you see. The Conservative ideology increasingly steamrolled moderate and Progressive viewpoints, from around the '80s up until 2008. Heck, you ruled all three branches and most of the corporate media for six years! What a great natural experiment!
It'd be one thing if it worked out swimmingly. Or if there was a mea culpa on the part of Conservatives. Or even a re-evaluation of what went wrong. None of which is the case.
Instead, all of the ills resulting are contrary to what would have happened had Progressive, pro-Consumer policies been the rule.
It's not \"playing the blame game\", it's taking the matches away from that crazy uncle who gleefully set the basement on fire and who, unremittingly, wants to do the same thing with the neighboring house.
So yeah, until you guys do a Greenspan and admit, \"Whoops\" and \"Won't be fooled again\", we'll be there to confront you with the consequences - and results - of your zany ideology. Sorry if truth is so hurtful to your tender, blinkered egos, though. Really.
@Trai_Dep: Republican or Democrat, Conservative or Progressive...
You are ALL to blame...I am to blame too. I'm not sure what more I can do, but I know I'm still partially to blame for the way this country is turning out.
Personally, I don't belong to any of those groups because those groups are useless. I have no party lines on which I must vote because \"generations of my family voted that way\". I've spent 20 years living in Massachusetts which is about as liberal as you can get and another 10+ combined in North Carolina and Bible Belt Texas, which is...not...liberal.
So far, all those political groupings have equally FUBAR'd the country. To go about blaming one side or the other is myopic at best. We are going to be sitting still, in the crapper, until politicians and parents and everyone stands up and actually demands EVERYONE to have some god damn PERSONAL RESPONSIBILITY.
@Trai_Dep: I'm not sure who \"you guys\" are. If the question is whether I am more conservative than you, I think we have already established that. But I, unlike you, am willing to accept anyone that has the answers. I'm not as concerned with idealogy as I am with results.
I don't think the answer to every problem is more money and more beauracracy. You have more faith in the government than I do. I didn't trust it when the Republicans ran it, and I don't now. I believe that big government is not what has made this country great and not what the Founders intended.
I don't know where this country is headed, but I don't know how anyone can argue that things are improving.
@HiPwr: What makes you think that I have faith in the government? Does Katrina ring any bells? It's just that, as the health insurance companies have shown regularly, and the cable companies gleefully - or any conglomerate - businesses beyond a certain scale show even less flexibility or power to petition.
Vibrant markets, informed consumers, true choice and a government strong enough to ensure the companies stay small enough to ensure true competition and obey the law (and common decency) are the optimal path. The founding fathers were as concerned with the dangers of concentrated, inherited wealth (royalty, really) than a Unitary Executive (which was embraced by Conservatives the last cycle, as I recall).
All of the companies that make America great were largely founded when competition and choice are present, and in these days of conglomeration, this will only happen when these companies are split up (good luck, right) or when an equally powerful actor (that'd only be people, forcing our government to do so) ensure it's so.
It's not that we like the option of forcing government to make sure business doesn't run roughshod, it's simply the best remaining optimal solution. Because we're pragmatists, not ideologues. We're interested in results, not pretty, poll-tested words.
The other approach - throw enough taxpaid crumbs to mega-corps while stripping consumers of meaningful choice - has been tried, and it's failed. And it's what Conservatives largely argue is the best approach to continue. Or more precisely, once you strip their comforting buzzwords away, their ACTIONS are to favor mega-corps over individuals. It's irrational. And it's against our interests. And ironically, it's against business' long term interests as well.
Surely you want individuals to reign supreme, right?
@HiPwr: No, but his* screwups were so monumental and staggering beyond belief that, believe it or not, it might take more than a few months to correct. Surprisingly.
* And his party that controlled Congress, 'natch.
@meechybee: Or, y'know, keep control of the Senate away from people convinced that the government is always the problem (then scramble to make sure that this turns out to be the case). The Senate managed to keep everything on an even keel for over fifty years before a certain faction took the reins, remember.
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Is the NCUA the same?
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@nytmare: here's a link to the story about the 2 corporates going into receivership earlier this year: [www.cuna.org]
@nytmare: good question. the answer is \"not yet\". traditionally, instead of premiums, credit unions are required to reserve a percentage of their assets (known as an NCUSIF - national credit union share insurance fund).
things are changing later this year though b/c 2 of the nation's largest corporate credit unions were put into receivership (US central & wescorp).
regulators haven't decided exactly what to do yet, but whatever they finally decide will most likely require credit unions contributing premiums instead of (or in addition to) the reserve NCUSIF.
instead of increasing insurance premiums at member banks, maybe it's time for shadow banks to make a decision: become a bank & start paying premiums (plus a catch-up premium) or divest your bank holdings.
@mac-phisto: Nuke the shadow banking system. Their entire rationale (unregulated actors \"innovating\" the financial markets will lead to a new golden age) has cost us over $14 Trillion to date. They've been given enough rope.
\"Much like how home sellers include the list price of real estate agent commissions into the sale price of a home\"
Home sellers tell themselves that, but the reality is that a home sells for what someone is willing to pay for it.
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@Cant_stop_the_rock: Correction--the home sells for whatever the buyer's lender will let them pay. I know plenty of people (myself included) that've had to revise an accepted offer because of a low appraisal. If the buyer can't get the financing for the offer amount, you either take the lower amount or walk away (which is a bad move in this climate).
the FDIC is backed by the full faith and credit of the United States government
I like that, and yet, no one ever understands that we have no faith and government sucks.
Would we need the FDIC if we had full-reserve banking?
No.
Just sayin'.
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United States government... so even if they run out of cash, we can just print some more!
@PenguinBlue: This is an incorrect assessment, I believe.
If the FDIC runs out of money in the short term, they don't \"just print more\".
They have a line of credit available at the US treasury, and the ability to issue FDIC bonds- but this borrowed money HAS TO BE REPAID.
So the FDIC has unlimited borrowing from the government to guarantee liquidity in the short term, but that money will be reimbursed with interest from premiums and special assessments in the future; if the FDIC default rate increases, then premiums assessed on banks will increase in the long term to pay off the government backstop.
The system is designed to prevent runs on banks, so that as depositors we can trust our money is safe.
@ttk2: sorry mis post
United States government... so even if they run out of cash, we can just print some more!
seems to be the idea of the Obama administration so far.