The EXEGETIST: A Library Of Independent Political Thought. By: Jack H. Dawsey

More Bank Failures?

By:  Jack Dawsey

A recent report said that Federal regulators expect bank failures to cost the Federal Deposit Insurance Corporation Fund (FDIC) about $100 billion in the next four years.  That’s up an additional $30 billion from an earlier estimate.  [The increase cost proves a point I use to make as Budget Director for a major Naval Installation.  I said the only qualification a person needed to work in the government was to know “only” their arithmetic addition tables, that subtraction and division wasn’t necessary (not even the knowledge of one’s multiplication tables), because the federal budget only increases]. 

The (FDIC) made the upward projections of $30 billion but its Board of Directors approved a requirement for banks to prepay an estimated $45 billion in (FDIC) insurance premiums.  According to Chairman, Ms. Sheila Bair, the plan requires the banking industry to belly up to the bar, and absorb the increase costs.   What does this mean to you?  Well, for starters, it probably means that you will be required to purchase additional (FDIC) insurance premiums on your life savings.  You will likely pay more for personal banking services too, including credit card interest, bank services, the opening and closing of accounts, and other requirements such as the maintenance on your checking account.  And to boot, (not to be facetious), you may be required to pay for the conversation between you and your bank teller, beginning with the customary: “May I help you sir…”  Be careful with your cordial comments, they may appear as a line-item cost in your next bank statement. 

The 2008 and 2009 bank failures have drained $billions from America’s banking industry.  And in order to recoup, the (FDIC) will levy this additional cost option on the banks rather than seek a special emergency loan from the U.S. Treasury Department.   

It’s been reported that ninety-five banks have failed thus far, this year.  Some say that America’s financial status is at its lowest point since the Great Depression.  I remember another low point in the banking industry.  It occurred in 1988 when the savings-and-loan debacle hit this country.  That boondoggle occurred in part, by another son of George Bush (41).   Remember the Lincoln Savings and Loan and its collaboration with the famous fab-five in the U.S. Senate?   How soon we forget those representatives that first rolled the dice against the people’s money.   It happened again “big-time” as they say in Texas in the final years of another Texan, Bush (43).  In this writer’s opinion, it continues to happen under this current Obama Administration, and the (FDIC) Chairman, Sheila Bair, a 2006 Bush appointee.

The additional $100 billion cost in the (FDIC) is expected because of future bank failures.  Some analysts expect hundreds more banks will fail.  And according to Ms. Bair, she hasn’t ruled out the possibility of tapping a $500 billion dollar credit line with the U.S. Treasury Department.  By the way, that’s your money!

Legalize thievery in high places is serious.  But when the working class loses their life savings, or their 401-K retirement plan is drained, and the real purchasing value of their money is reduced, it becomes catastrophic.  To add insult to injury, customers already pay the bank a handling fee.  They are assessed a service charge on top of that, almost at whim.  And as a result of this additional (FDIC) costs, bank customers will likely be required to purchase additional (FDIC) insurance premiums on their savings.  Who knows what that limit will be.  When is enough, enough?  To exacerbate the swirling issues of simple banking, the (FDIC) will probably permit the healthiest banks to retain more of their capital, thus drive the weaker banks into bankruptcy.  Is anyone listening?

Oh by the way, it’s been reported the (FDIC) has about $21 billion in “reserve” to cover losses from other prospective bank failures.  Someone was quoted saying, ”There’s lots of liquidity; there’s lots of cash.  Liquidity’s not an issue for the banking system right now,” said an economist.   Yea?  I have an Eskimo Igloo on Miami Beach that I want to sell.

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