General Discussion
In reply to the discussion: A question for Obama and\or his supporters here: [View all]quaker bill
(8,224 posts)The FDIC did not have anywhere near enough. Bottom line the bankers were never going to really lose all this money, because they were gambling with yours. If the bets go sour, there is no money in the bank to cover your account balance, and FDIC goes to the taxpayer (more accurately the Treasury) for funds. Since the Treasury did not have the many Trillions needed, Treasury then goes to the FED, the FED fires up its workstations and mouse clicks vast quantities of money into existence, pretty much just as it did.
In the final analysis, these folks "borrowed" your money to buy vaporware certificates, worth in truth far, far less than the paper they were printed on.
I have actually been down this road. My dear beknighted grandmother purchased with her life savings and I subsequently inherited an unsecured investment in a Savings and Loan. I ended up with a certificate worth many shares in a bankrupt S&L. A decade after her death, the S&L came out of bankruptcy, and suddenly the shares that were absolutely worth nothing and could not be sold for 15 years became worth $0.25 on her original dollar. I sold them at the first opportunity.
The taxpayers were going to be dinged, either in a complete wipe out of their savings, or with the expense of a bail out.
FDIC is not set up to handle a systemic collapse of this size, they did not have the money, and were never set up for this. They are set up much like the fire insurance on your house, it only works because a relatively small number of homes see damage in any year. It would fail if most of them burnt up at the same time. This is something I am also familiar with, I live in FL and we had 4 hurricanes back to back over a three week period in 2004. Nearly everyone had claims and the insurance industry barely made it through.