Wednesday, September 23, 2009

Sheila Bair on Rope

Bloomberg and many other news organizations are reporting the dire state of FDIC. Hope Obama Government and Dem majority Congress would not have to run again to the rescue. If indeed FDIC is in trouble, Fed rescue will be essential for deposits of common Americans who only recently are getting back the religion on saving.

One wonders whether the sucker, FDIC, may not be on it's own feet unless some Tax Dollars are work. The question is how far Sheila Bair can go in denting the profits of existing 'fat banks' (profitable banks who can pay the money). It will be much better if she concentrates on this task of replenishing coffers of FDIC rather than engaging in internecine battles with Treasury Secretary about the shape of impeding financial regulations. Same goes for another lady in charge - Shapiro, SEC chief - who must be finding SEC in doldrums after the recent drubbing by the New York Court with regards to BofA case.

The case with FDIC is clearly off mismanagement. It was very clear by the start of the year that around 1000 Americans bank can go down under and it was required for FDIC to plan for such eventualities. Subsequent bank failures have not been that severe but FDIC still finds itself in the hole. May be Obama Administration touted $200B as saving in the budget prematurely. That was the original money Obama Administration had planned in March of 2009 as follow up money to TARP. In August it claimed that those funds are no longer required, it reported that as saving in the revised budget otherwise flooded by red ink and took home congratulations from Public for being prudent whereas here we have FDIC crying for a life line from Treasure Department. Any lending of funds by Treasury to FDIC (surely funded by Ben Bernanke Greenback Printing Press) has to be regarded as Tax payers money with sovereign guarantee. We have been that route in case of Fannie May and Fredi Mac and we know the end result - underwriting by Uncle Sam means in the end money by Tax Payers.

All in all task is cut out for Sheila Bair and current signs are not any promising.

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