Wednesday, August 27, 2008

Bank Issues

Minyanville on Bank Health

I'm struggling to understand how the FDIC can first put a bank on its problem list just 2 weeks before it becomes the third largest bank failure in US history. (Indymac)

I'm going to have to concur with Minyanville. How could a bank with more assets/liabilities than all of the other 1Q2008 'troubled banks' combined not be added onto their troubled lender list until 2 weeks before it failed (and long before the FDIC reports the quantity of banks on the list)?

The FDIC needs to speed up the process. Yes, yours truly is advocating a government department speed up hiring! Sit down, breath deeply. You won't see that advice from me often. ;) The best thing for the economy is to shake out this issue and get it over as quick as possible.

The greatest danger to the economy is to small businesses. For a small business to function, its too common for them to need more than $100k in their accounts (or $200k for a 'mom and pop' business) to function. The FDIC limit must become inflation adjusted and take into account the impact on small businesses. $250k/individual or $500k for a mom and pop operation seems a reasonable level of insurance.
CR didn't miss that the FDIC's fund is running low

Indymac to cost FDIC more than predicted

So now the healthy banks are going to be required to pay more for the mandatory insurance. Gee... that won't do anything to exacerbate the current credit crunch... or could it? ;) Yes, my proposal would put more accounts into the insured category. Sadly, that should have been the case for years.

Oh... and put the reserve limits back at the old standards. That would tighten credit short term, but would allow for 'flexibility' during the next credit shock. Sigh... why were the old lessons so thoroughly forgotten?

Late edit:
Bankruptcy filings up 29%

Business filings were up 41%. Ouch.

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