fencerider2
02-29-2008, 09:14 AM
Hell we don't need the FDIC anyway, since Joe says are dollars will be worthless if the banks fail.:lol:
http://www.autodogmatic.com/index.php/sst/2006/11/29/the_fdic_worse_than_useless
"ISSUES"
The FDIC holds reserves as a provision against potential losses of member banks. According to the FDIC's 2005 report, these reserves amounted to about $34 billion in that year, for just the bank insurance fund (the main fund). Yet, only $2.4 billion of this is in cash and equivalents -- the rest is in the form of US Treasury Securities! In other words, most of the "money" in the FDIC's reserves doesn't actually exist!
The distinction is significant. Based on the larger, US Treasuries-including number, the FDIC claims the insurance fund ratio is about 1.25% (it's "goal", conveniently enough), for about $2.7 trillion of insured deposits. But excluding the useless Treasury Securities and counting only cash, the insurance fund ratio is more like .08%. That is, for every $100 deposited under FDIC, only about eight cents are backed by reserves.
So we have here yet another shameful instance of US bond-based accounting shenanigans that totally undermine the solvency of a government financial service. How could the general public and various auditors miss this? How could such a thing even theoretically be useful?
In fact, a parallel institution, the Federal Savings and Loan Insurance Corporation (FSLIC), immediately went bankrupt when challenged by the S&L crisis in the early 90s. It was not-so-elegantly shut down and merged with FDIC. I suspect the FDIC would simply repeat this performance when faced with a banking industry meltdown at least on the scale of the S&L crisis (that is, $150 billion+ of losses... in 1990 dollars).
There is a special irony to this situation. The first half of the Glass-Steagall Act (1932), provided for the following:
1 Allowing US Treasury Securities to be used as financial collateral.
2 Relaxed the discount window collateral requirements.
3 Allowed the Fed to lend out the government's gold.
The first of these provisions engendered the use of US Treasury Securities as fully-fledged "money", which they are really not. A liquid financial market was resultingly created for them. This is bad enough when engaged in privately, as a substitute for real "investment". But the practice was eventually adopted by the government itself; hence an FDIC which holds most of it's assets in US Treasury Securities -- obligations from the government to itself. If a private entity listed such "assets" on it's balance sheet, it would be guilty of fraud under the very same laws the government itself ignores.
http://www.autodogmatic.com/index.php/sst/2006/11/29/the_fdic_worse_than_useless
"ISSUES"
The FDIC holds reserves as a provision against potential losses of member banks. According to the FDIC's 2005 report, these reserves amounted to about $34 billion in that year, for just the bank insurance fund (the main fund). Yet, only $2.4 billion of this is in cash and equivalents -- the rest is in the form of US Treasury Securities! In other words, most of the "money" in the FDIC's reserves doesn't actually exist!
The distinction is significant. Based on the larger, US Treasuries-including number, the FDIC claims the insurance fund ratio is about 1.25% (it's "goal", conveniently enough), for about $2.7 trillion of insured deposits. But excluding the useless Treasury Securities and counting only cash, the insurance fund ratio is more like .08%. That is, for every $100 deposited under FDIC, only about eight cents are backed by reserves.
So we have here yet another shameful instance of US bond-based accounting shenanigans that totally undermine the solvency of a government financial service. How could the general public and various auditors miss this? How could such a thing even theoretically be useful?
In fact, a parallel institution, the Federal Savings and Loan Insurance Corporation (FSLIC), immediately went bankrupt when challenged by the S&L crisis in the early 90s. It was not-so-elegantly shut down and merged with FDIC. I suspect the FDIC would simply repeat this performance when faced with a banking industry meltdown at least on the scale of the S&L crisis (that is, $150 billion+ of losses... in 1990 dollars).
There is a special irony to this situation. The first half of the Glass-Steagall Act (1932), provided for the following:
1 Allowing US Treasury Securities to be used as financial collateral.
2 Relaxed the discount window collateral requirements.
3 Allowed the Fed to lend out the government's gold.
The first of these provisions engendered the use of US Treasury Securities as fully-fledged "money", which they are really not. A liquid financial market was resultingly created for them. This is bad enough when engaged in privately, as a substitute for real "investment". But the practice was eventually adopted by the government itself; hence an FDIC which holds most of it's assets in US Treasury Securities -- obligations from the government to itself. If a private entity listed such "assets" on it's balance sheet, it would be guilty of fraud under the very same laws the government itself ignores.