Washington plans for big bank failure

[TwixVoy]

Who wants to bet this is Citi that they are preparing to go under? Other than Bank of America it is the biggest bank that (we know of) is in so much trouble it is close to this point.


http://money.cnn.com/2009/03/06/news/dodd.fdic.fortune/index.htm?postversion=2009030614


"NEW YORK (Fortune) -- The government is bracing for a big bank failure.

A bill introduced in Congress would give the FDIC, the agency that stands behind Americans' bank deposits, temporary authority to borrow as much as $500 billion from the government to shore up the deposit insurance fund. "

[Avalux]

1. Obama WILL nationalize the top big banks. He just won't call it that.

He knows it needs to be done but can't announce it without people losing their minds. A quiet takeover without using that word will happen.

[sandnsea]

5. I think so too

But whenever this happens and whatever they call it, there are still going to be a shitload of people who are going to freak right out of their mind. We have got to be prepared to calm these people down.

[Pirate Smile]

2. sssshhhhh. Nobody is supposed to act like we know what the FDIC is preparing to do.

We just need more clueless talking heads on TV getting hysterical and railing on Obama.

"Dodd said he introduced the legislation at the behest of other regulators, notably Federal Deposit Insurance Corp. chief Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner. All three recently wrote Dodd to support an emergency expansion of the FDIC's capacity to borrow from the Treasury.

"This mechanism would allow the FDIC to respond expeditiously to emergency situations that may involve substantial risk to the financial system," Bernanke wrote in a Feb. 2 letter to Dodd."

[dkf]

3. Dodd-Crapo bill? LOL.

[Warpy]

4. My guess is that when the first big bank fails

that's when we'll see it nationalized. Until then, they're going to continue trying to fill the black holes with money they don't really have.

[SOS]

6. Agree

They are waiting for a big one to collapse and then frame nationalization (correctly) as the only remaining option.

I thought it would be the impending collapse of Eastern Europe that took down the remnants of Wall Street, but it looks like Citi will do the job.

[snappyturtle]

7. Agreed. The failure has to happen to make nationalization acceptable

to those who fear "socialism". I have had it with the ignorance wrapped around that term.

[CoffeeCat]

8. The Dodd/Crappo or Do-Crap (my abbreviation) bill...

..is being pre-announced--because everyone in DC is bracing for major chaos and hysteria
that will ensue in the days and weeks ahead.

Americans are going to start shitting (hence, the appropriately named Do-Crap bill) once
they see the biggest banks in America, toppling like dominoes.

They'll want to freak and remove all of their money. After all, if City and Wells Fargo
are up in smoke, how safe can they feel about "Fred's Bank of Walla Walla"???

The answer? NOT VERY.

This very public announcement of FDIC shored-up funds is about stemming a bank run.

Next week is going to be economic hell on wheels. The market will continue to tank, the media
will still be talking about soaring unemployment numbers and large banks will be tanking.

All of this will further erode confidence in Wall Street..and I'm sure the stock market will
plummet as well.

As Samuel L. Jackson said in "Jurassic Park"..."Hold on to your butts."

[Warren Stupidity]

9. FDIC reported this week that it is out of funds.

So this bill is a stop gap to continue the FDIC backstop. That said there is of course plenty of speculation that both Citi and BoA are done.

[FarCenter]

12. FDIC had $19 Billion at the end of 2008, several banks ago

They also have a $30 billion line of credit with Treasury.

But it really can't cope with the failure of any of the banks in the $100 billion and up assets class.

The normal function of the FDIC is to take over a bank before the losses get out of hand, merge the healthy assets and deposits into a healthy bank, and take the losses on the remainder.

The $500 billion authority is more of a confidence building measure. It's doubtful that they would blow the whole amount on Citi, because they would be out of ammunition at that point.

[TNDemo]

10. So will they nationalize all banks or just the big failing ones?

And what will it mean for the average account holder?

[TwixVoy]

11. Well

They will probably have no choice but to nationalize big ones like Citi and BofA. Letting them just fall would literally send us in to another great depression.

It means very little for the average account holder UNLESS the FDIC for whatever reason stops being able to insure your deposits. Should that ever happened expect a nationwide bank run like you have never seen before.... almost every bank in the country would fail within 24-48 hours in such a situation.

[peacetalksforall]

14. So they did it in two steps - one where we pay the bonuses and protect rich indivials and the

move where we nationalize to save the little people (so that we can pay to give some more to the already rich in other industries?)

Interestingly, Dodd is supposed to be very close with Citi according to rumor on the net.

[peacetalksforall]

13. I had no idea there was talk like this going on. I nearly skipped over this thread.

A question. If people pulled their money, would they put it back in if they knew that bank had been nationalized?

If yes, isn't this the greatest way to overcome the ideological fears of those old anti-communist mongers?

Looks like it times to expose something - the term socialism is just a term for a concept held by a small number of people.

It's something concocted during the cold war and especially under Reagan.

Ironically, an aspect of so-called 'communist socialism', for me, is represented in block snitchers, gulags, worthless tv and poapers. And that is exactly what the rabid conservatibes love and don't mind about our move to spying, building prisons, homeland security, and their dear and worthless fox, cnn, nbc, abc, rush-hannity-north-liddy radio and all their hysterical reverends.

God help us. Mother help us. Earth help us.