The only organization that seems to hemorrhage money more than the Auto Industry, or AIG, or City Group, would have to be the FDIC as its been steadily drained by some 25 recent bank failures. Now in an effort to raise money the FDIC is doing a onetime emergency fee on all banks that amounts to somewhere between 50% –100% of a small banks profit. Needless to say the small banks are raising Cain over the emergency fee! Then, of course, is the logic of solvent banks being charged for the failure of insolvent banks having the net effect of further weakening all banks. This line of thinking is largely rejected by the elite policy masters of the Obama Administration whose zeal for socialist solutions knows no bounds.
As the Financial Crisis continues it’s becoming increasingly clear that the Government may not have enough fingers for all the holes in the dike. The danger is in transferring the private sectors woes into a massive overreach by the United States government that both bankrupts and destroys the currency or that destroys the free market engine of growth. Socialist economies are stagnant, they don’t grow and they include high taxes and high unemployment. The Obama Plan calls for robust economic growth that his growth killing socialist policy initiatives will surely kill. His recent tax war on wealth has badly needed money sitting on the sidelines looking for tax shelters instead of in the economy, invested, and being put to work. In the middle of it all are the banks who still have no incentive to led to anyone when every indicator of the economy continues to indicate continued contraction in economic activity.
The Head of the FDIC had the option to use Treasury Funds but opted to penalize the banks who did it right rather than risk having all banks tainted with the “bailout brush”. I don’t begin to understand what she meant by that especially since the treasury is printing money like its going out of style. This administrative emergency fee is just a continuation of the soak the rich, redistributionist philosophy of the decidedly socialist Obama Administration. Here is a clip from Bloomberg. Don’t forget to read the whole article at this url:
March 4 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair said the deposit insurance fund could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.
“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.
“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”
The FDIC last week approved a one-time “emergency” fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said. The fund was drained by 25 bank failures last year.