PeakOil is You
THE FDIC Thread (merged)
Re: FDIC - freeze large dep. if a run occurs . . .
by smallpoxgirl » Sat 19 Jul 2008, 13:13:34
$this->bbcode_second_pass_quote('shortonoil', 'W')hen you have firms like J.P. Morgan leveraged out 37:1, and sitting on $137 trillion in derivatives, “ concerned” must be the latest popular euphemism.
If JP Morgan defaults on $137 trillion in derivatives, FDIC will be irrelevant. Their Deposit Insurance Fund is only $54 billion.
"We were standing on the edges
Of a thousand burning bridges
Sifting through the ashes every day
What we thought would never end
Now is nothing more than a memory
The way things were before
I lost my way" - OCMS
Of a thousand burning bridges
Sifting through the ashes every day
What we thought would never end
Now is nothing more than a memory
The way things were before
I lost my way" - OCMS
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smallpoxgirl - Expert
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Re: FDIC - freeze large dep. if a run occurs . . .
by Cashmere » Sat 19 Jul 2008, 13:13:37
$this->bbcode_second_pass_quote('smallpoxgirl', 'T')his rule just requires banks to have systems in place to be implemented "in the event of the institution's failure". Obviously if the bank fails, they need to be able to place a hold on large accounts until they can sort out whether they exceed the insurance limits. The rule only applys to large banks, so if there's anything to be alarmed about in this notice, it's the fact that FDIC is evidently concerned that more large banks will fail.
The actual rule can be found here:
http://edocket.access.gpo.gov/2008/pdf/E8-15492.pdf
The actual rule can be found here:
http://edocket.access.gpo.gov/2008/pdf/E8-15492.pdf
SPG - so what is the definition of "failure"?
It would seem to me that, if a bank has already closed its doors - i.e. "failed" - then there is no need to freeze deposits, as they are, de facto, frozen when the doors are locked and the sign goes up.
So your interpretation, it seems to me, has an irreconcilable internal contradiction.
And, of course, that's the confusion that is intended by the vague nature of the announcement.
Have no doubt - this is intended, and this will be used, to freeze accounts when the FDIC has determined that a bank has "failed", but <i>before</i> that bank is insolvent and out of business.
If this wasn't the case, the new rule would be meaningless.
So this is how it will go down . . .
Bank in trouble.
FDIC watching bank closely.
Bank in big trouble.
FDIC at the ready.
Customers, spooked by IndyMac and several more failures in the interim, catch wind of the big trouble and start a run.
FDIC steps in and declares bank "failure", freezes all large depositors. The "small" depositors get out their nickels and dimes, causing the panic to subside.
FDIC takes several actions to "solidify" bank, including, but not limited to, selling it, restructuring it, recapitilizing it, and so on.
Several weeks or months later, the bank reopens for business, with large depositors still partially frozen.
In this manner, multiple, simultaneous or contagious bank runs will hoped to be stopped.
So again, anybody want to tell me, what would be the point of "freezing" accounts on a bank that has already failed?
When the bank can't pay out to its depositors - that is, when it has failed - then there is no more need to restrict withdrawals by depositors.
QED
Massive Human Dieoff <b>must</b> occur as a result of Peak Oil. Many more than half will die. It will occur everywhere, including where <b>you</b> live. If you fail to recognize this, then your odds of living move toward the "going to die" group.
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Cashmere - Heavy Crude
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Re: FDIC - freeze large dep. if a run occurs . . .
by Cashmere » Sat 19 Jul 2008, 13:17:46
$this->bbcode_second_pass_quote('smallpoxgirl', 'O')bviously if the bank fails, they need to be able to place a hold on large accounts until they can sort out whether they exceed the insurance limits.
Please explain what you mean by this.
There is no need to "sort out".
The amounts insured in each account are knowable and known at any given instant.
It's a very simple metric.
With the IndyMac failure, for example, the FDIC knew within hours of seizing the bank approximately what the uninsured amounts were - those numbers were posted later that same day.
I don't understand the point you're trying to make.
Massive Human Dieoff <b>must</b> occur as a result of Peak Oil. Many more than half will die. It will occur everywhere, including where <b>you</b> live. If you fail to recognize this, then your odds of living move toward the "going to die" group.
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Cashmere - Heavy Crude
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Re: FDIC - freeze large dep. if a run occurs . . .
by smallpoxgirl » Sat 19 Jul 2008, 13:54:14
$this->bbcode_second_pass_quote('Cashmere', 'S')PG - so what is the definition of "failure"?
It would seem to me that, if a bank has already closed its doors - i.e. "failed" - then there is no need to freeze deposits, as they are, de facto, frozen when the doors are locked and the sign goes up.
It would seem to me that, if a bank has already closed its doors - i.e. "failed" - then there is no need to freeze deposits, as they are, de facto, frozen when the doors are locked and the sign goes up.
Failure as in FDIC takes control of the bank. The rules automate and simplify the process of FDIC taking control of failed banks.
And the insurance limits aren't always completely simple to sort out. People may have more than one account and joint accounts and someone needs to figure out how much their coverage is. Obviously if you have $5000 in your account, you're pretty clearly not over the limit, thus the need to only freeze larger accounts that might be over the coverage limits.
"We were standing on the edges
Of a thousand burning bridges
Sifting through the ashes every day
What we thought would never end
Now is nothing more than a memory
The way things were before
I lost my way" - OCMS
Of a thousand burning bridges
Sifting through the ashes every day
What we thought would never end
Now is nothing more than a memory
The way things were before
I lost my way" - OCMS
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smallpoxgirl - Expert
- Posts: 7258
- Joined: Mon 08 Nov 2004, 04:00:00
