Comments on: The FDIC May Need A Bailout From The Banks Now http://weakonomics.com/2009/09/25/the-fdic-may-need-a-bailout-from-the-banks-now/ Everything That's Wrong With You And Your Money Fri, 19 Mar 2010 02:59:41 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Thicken My Wallet » Blog Archive » Do “too big to fail” banks create shareholder value? http://weakonomics.com/2009/09/25/the-fdic-may-need-a-bailout-from-the-banks-now/comment-page-1/#comment-3186 Thicken My Wallet » Blog Archive » Do “too big to fail” banks create shareholder value? Tue, 03 Nov 2009 08:53:28 +0000 http://weakonomics.com/?p=3082#comment-3186 [...] First, a note about the meaning of the phrase. In the late 1980’s and early 1990’s, two papers published by the Federal Reserve of Atlanta and Minneapolis respectively argued that managers were pursuing a too big to fail acquisition policy to ensure that the deposit base became so large that the government would find it too costly to close the bank (with a nice side benefit of increased compensation for the C-level executives). As a loss mitigation strategy, the government would effectively provide a guarantee to the entire bank (here’s a rather chilling paper in 2000 supporting the assertion that the bond market thought a too big to fail acquisition strategy is a default risk decreasing event. It was the concept of moral hazard pursued to the max (leading to a strange possibility of the banks possibly bailing out FDIC). [...] [...] First, a note about the meaning of the phrase. In the late 1980’s and early 1990’s, two papers published by the Federal Reserve of Atlanta and Minneapolis respectively argued that managers were pursuing a too big to fail acquisition policy to ensure that the deposit base became so large that the government would find it too costly to close the bank (with a nice side benefit of increased compensation for the C-level executives). As a loss mitigation strategy, the government would effectively provide a guarantee to the entire bank (here’s a rather chilling paper in 2000 supporting the assertion that the bond market thought a too big to fail acquisition strategy is a default risk decreasing event. It was the concept of moral hazard pursued to the max (leading to a strange possibility of the banks possibly bailing out FDIC). [...]

]]> By: Arleen Bothwell http://weakonomics.com/2009/09/25/the-fdic-may-need-a-bailout-from-the-banks-now/comment-page-1/#comment-3067 Arleen Bothwell Sun, 04 Oct 2009 22:28:00 +0000 http://weakonomics.com/?p=3082#comment-3067 I heard the gov promised 500 billion in credit if necessary for the FDIC's use. Of course, there's nothing but thin air to that loan. If it ever needs conveying to the FDIC, taxation is the only possible source for repaying that. BTW, I don't think they did much to let us US's know before putting that weight upon our great-great grand childrens' shoulders. This is a new, unheard of example of ancestors dishonoring their descendants. "If you don't have the money, don't borrow it" is as simple as it gets, but maybe we should buckle down and pay debts so we can maybe stay in our homes and garden in the back yard. With 3 or 4 part-time jobs apiece maybe we can afford the property taxes and insurance, but what will the millions of jobless do that use other people's real estate in which to live? Move to China? Book early, but don't forget to drop by the bank first. As news spreads about what gov was wanting to be kept quiet, we're probably teetering on the brink of a tumultuous bank run. Would it be better short term to keep this quieter, or should we hasten the hit bottom point soon, so we all know it's time to resurrect? The last time took almost 10 years - I give the next one 20 years before we relearn essential economics and repay obligations. I heard the gov promised 500 billion in credit if necessary for the FDIC’s use. Of course, there’s nothing but thin air to that loan. If it ever needs conveying to the FDIC, taxation is the only possible source for repaying that. BTW, I don’t think they did much to let us US’s know before putting that weight upon our great-great grand childrens’ shoulders. This is a new, unheard of example of ancestors dishonoring their descendants.

“If you don’t have the money, don’t borrow it” is as simple as it gets, but maybe we should buckle down and pay debts so we can maybe stay in our homes and garden in the back yard. With 3 or 4 part-time jobs apiece maybe we can afford the property taxes and insurance, but what will the millions of jobless do that use other people’s real estate in which to live? Move to China? Book early, but don’t forget to drop by the bank first.

As news spreads about what gov was wanting to be kept quiet, we’re probably teetering on the brink of a tumultuous bank run. Would it be better short term to keep this quieter, or should we hasten the hit bottom point soon, so we all know it’s time to resurrect? The last time took almost 10 years – I give the next one 20 years before we relearn essential economics and repay obligations.

]]> By: the weakonomist http://weakonomics.com/2009/09/25/the-fdic-may-need-a-bailout-from-the-banks-now/comment-page-1/#comment-3030 the weakonomist Sun, 27 Sep 2009 23:41:25 +0000 http://weakonomics.com/?p=3082#comment-3030 You're right, I've fixed it now. Thanks You’re right, I’ve fixed it now. Thanks

]]> By: Jmayhak http://weakonomics.com/2009/09/25/the-fdic-may-need-a-bailout-from-the-banks-now/comment-page-1/#comment-3028 Jmayhak Sat, 26 Sep 2009 17:40:37 +0000 http://weakonomics.com/?p=3082#comment-3028 I think you've got some billions where trillions should be in the 3rd paragraph I think you’ve got some billions where trillions should be in the 3rd paragraph

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