Comments on: Who Robbed FDIC $6 billion?

By: TFB

TFB — Mon, 29 Sep 2008 23:27:21 +0000

Frank - Your blame for Bill Clinton is absolutely wrong. Glass-Steagall Act was repealed by Gramm-Leach-Bliley Act in 1999. The three names in Gramm-Leach-Bliley, Senator Graham, Rep. Leach and Rep. Bliley were all republicans. The law passed in the Senate 90-8-1 and in the House 362-57-15. It was veto-proof. President Clinton had to sign it.

By: frank

frank — Sat, 27 Sep 2008 06:17:24 +0000

try bill clinton who was in office when the 1933 depression act
or Glass-Steagall Act was repealed.
it was put in place after the depression to make banks be banks and brokers be brokers.
banks were not allowed to leverage their loans and had to hold cash.
or at least alot more than now. no way were they allowed to use 30 or 40 times every dollar they had in the bank

By: TFB

TFB — Wed, 16 Jul 2008 17:00:00 +0000

As promised, my thoughts are in this follow-up post:

Who Really Robbed FDIC $6 Billion

Calgreek - FDIC charges insurance premium from all banks. Indirectly all depositors pay the insurance premium. The premium is a little higher for banks who have lower funding levels but I think the premium differential is too small to make a difference on the banks' risk taking appetite.

Anon - The $32 billion assets number in the FDIC press release must be book value. If all IndyMac's mortgages are paid off in full immediately, IndyMac would have $32 billion. But we know that's not the case. When FDIC eventually sells those mortgages and other assets to another bank, they expect to get only $11 to $15 billion, or $4 to $8 billion short of the $19 billion in deposits. That's my interpretation. Otherwise it doesn't make sense.

By: Anonymous

Anonymous — Wed, 16 Jul 2008 14:54:00 +0000

I'll agree with the 2nd part of neha's answer, the prior owners of the real estate that Indymac now owns.

The $6B figure should represent the amount of money that Indymac's assets are short to cover its deposits. The reason Indymac is short is that the value of mortgages it has on its books has fallen.

One thing that confuses me is in the press release the FDIC says that Indymac had $32B in assets and $19B in deposits. If Indymac really has $32B in assets and depositors have first priority why would the FDIC lose any money on this?

By: calgeek

calgeek — Wed, 16 Jul 2008 04:56:00 +0000

The immediate recipients of the $6B are the depositers who got pretty high yields knowing that if push came to shove, the FDIC would protect their principal (up to $100k). Indirectly, the people who took out mortgages and didn't pay them back stole the money.

Does the FDIC charge the banks a premium, so that statistically they can cover any losses, or do banks get this insurance for free? Insurance is clearly necessary to keep people from keeping money under their mattresses, but I think the banking industry should collectively bear some of the risk. Gee maybe then they'd be more careful about regulating each other, hmm….

By: neha

neha — Tue, 15 Jul 2008 21:37:00 +0000

I suggest two places: 1) Into the pockets of those who shorted IndyMac and caused the drop in stock price from $47 to $0.14. and 2) real estate sellers who got a high value for their house before the bubble popped.

By: TFB

TFB — Mon, 14 Jul 2008 20:03:00 +0000

Ted – I'm actually looking for who specifically have taken the $6 billion FDIC will lose in resolving this failure. Alan Greenspan may have caused the housing and mortgage crisis, but he certainly doesn't have $6 billion.

By: Ted

Ted — Mon, 14 Jul 2008 19:28:00 +0000

If you want a single name, I'll throw out Alan Greenspan. He lowered the mortgage interest rates to near zero which started the real estate fire.

If you want a systemic answer, I'll give you greedy homeowners, greedy realtors, greedy mortgage brokers, greedy appraisal and lender reps, greedy banks, greedy financial managers that packaged the mortgages, and greedy investors looking for a free lunch.