So now the government wants to get back the more than $165 million in bonuses that AIG paid its executives. Hmm.
AIG, in case you've been dead since last year, is the insurance company that the government now owns 80 percent of due to more than $170 billion (yes, billion) in bailout money that taxpayers have put into the firm to keep it from collapsing.
Today's New York Times has an excellent piece written by George Washington University law professor Lawrence Cunningham that explains all the legal ways AIG or the government could use to justify getting the money back. My question, though, is what would the government do with the cash once it has it back?
By all indications, the more than $1 trillion in taxpayers dollars already spent or allocated for company bailouts or economic stimulus so far haven't fixed the fundamental problems in the economy: a housing market that completely tanked and lending by banks to companies and consumers to keep the economy moving. Why not take the cash from the bonuses AIG paid and put it toward fixing those problems directly? The FDIC, for example, has already shut down or taken over more banks in the last 15 months than it has in decades. $165 million sounds like it would go a long way toward recapitalizing at least a few of them, no? How many home mortgages could be made at affordable rates would that kind of cash? How many entrepreneurs could use $165 grand, let alone $165 million, to help make a payroll or get a new product into production?
Showing posts with label FDIC. Show all posts
Showing posts with label FDIC. Show all posts
Wednesday, March 18, 2009
Monday, March 9, 2009
When a bank goes bust
My last two posts were about the FDIC and its problem with so many bank failures. Apparently I wasn't the only one paying attention. Last night 60 Minutes went inside an FDIC takeover of a failed bank. Watch the video. It's informative.
Friday, March 6, 2009
FDIC, ING update
A few people asked after yesterday's post about the FDIC if it's time to start hiding money in a mattess. The answer's no.
The FDIC is not insolvent and probably won't get there. Yesterday's post was to illustrate the point that banks are so screwed right now that even the insurer we all count on to protect our money now has a liquidity problem (translation: it's low on cash).
The real danger is not the FDIC failing, it's that to stay solvent it will have to raise fees on banks which will make it harder for weak banks to operate.
Keep an eye on it, but don't cut holes in the mattress just yet.
On another note, I decided not to use the cash I have in my ING accouunt to knock down my credit card balance. Even with the dismal return, times are too tough to not keep some extra cash around. In the meantime, I am going to stop making ING deposits and redirect that money toward the card balance to pay it down more quickly.
The FDIC is not insolvent and probably won't get there. Yesterday's post was to illustrate the point that banks are so screwed right now that even the insurer we all count on to protect our money now has a liquidity problem (translation: it's low on cash).
The real danger is not the FDIC failing, it's that to stay solvent it will have to raise fees on banks which will make it harder for weak banks to operate.
Keep an eye on it, but don't cut holes in the mattress just yet.
On another note, I decided not to use the cash I have in my ING accouunt to knock down my credit card balance. Even with the dismal return, times are too tough to not keep some extra cash around. In the meantime, I am going to stop making ING deposits and redirect that money toward the card balance to pay it down more quickly.
Thursday, March 5, 2009
The end of FDIC insurance???
I was all set to post about the details of President Obama's housing rescue plan to help you figure out if you qualify for help, until I read this story by the Associated Press' Marcy Gordon:
WTF??
If you're clueless about what that means, let's take it from the top. The FDIC is the government agency that insures bank deposits in the US. It's there to prevent you from losing all the money in your checking or savings accounts should your bank go under. Usually your bank will have a big, black sticker on its doors with the FDIC initials, which is supposed to let you know your money is safe.
In most times, people don't pay the FDIC any attention, which is as it should be: banks, operating as they're supposed to, will have more than enough capital to cover any deposits you make, making the insurance of like your car or home policy: something you carry but rarely, if ever, have to use. Problem is, these ain't most times: so many banks have come so close to failing that even the FDIC is in trouble:
That's according to a letter from the FDIC's chairwoman, Sheila Bair, to the heads of the more than 8,300 banks that it insures. Gordon's story goes on that 41 banks have gone belly-up since the start of 2008 and the FDIC projects that over the next four years it'll spend $65 billion to protect consumers whose banks have or will fail.
Do I need to draw a map about why you should be at least a little nervous? You buy car insurance so that if you wreck, you can get the car fixed without going broke. But if your insurance company went under, you'd be out all the money you paid for insurance plus whatever it cost to fix your car or get a new one.
if banks are failing all over the place, and the insurer of all the money you put in the bank says it might not be able to cover you unless it raises more money from those same banks... you get where I'm going with this?
"The head of the Federal Deposit Insurance Corp. has warned that the fund insuring Americans' bank deposits could be wiped out this year without the money the agency is seeking in new fees from U.S. banks and thrifts."
WTF??
If you're clueless about what that means, let's take it from the top. The FDIC is the government agency that insures bank deposits in the US. It's there to prevent you from losing all the money in your checking or savings accounts should your bank go under. Usually your bank will have a big, black sticker on its doors with the FDIC initials, which is supposed to let you know your money is safe.
In most times, people don't pay the FDIC any attention, which is as it should be: banks, operating as they're supposed to, will have more than enough capital to cover any deposits you make, making the insurance of like your car or home policy: something you carry but rarely, if ever, have to use. Problem is, these ain't most times: so many banks have come so close to failing that even the FDIC is in trouble:
"Without substantial amounts of additional assessment revenue...current projections are that the fund balance will approach zero or even become negative."
That's according to a letter from the FDIC's chairwoman, Sheila Bair, to the heads of the more than 8,300 banks that it insures. Gordon's story goes on that 41 banks have gone belly-up since the start of 2008 and the FDIC projects that over the next four years it'll spend $65 billion to protect consumers whose banks have or will fail.
Do I need to draw a map about why you should be at least a little nervous? You buy car insurance so that if you wreck, you can get the car fixed without going broke. But if your insurance company went under, you'd be out all the money you paid for insurance plus whatever it cost to fix your car or get a new one.
if banks are failing all over the place, and the insurer of all the money you put in the bank says it might not be able to cover you unless it raises more money from those same banks... you get where I'm going with this?
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