United Liberty
FDIC
A libertarian view against the banks
Wed, 02/03/2010 - 1:22pm | posted by Matt Wittlief
There has been much ado over bailouts and socialism, Wall Street and Main Street, greedy bankers and noble capitalists, and a myriad of other related catchphrases and ideological positions when it comes to a discussion of the state of our financial system over the last year and a half. The debate rages on as today former Fed Chairman Paul Volcker testified before the Senate Banking Committee and with Barack Obama’s recent call for a new tax on banks. Volcker has suggested a ban on proprietary trading for certain banks. This is a modified reinstatement of Glass-Steagall which served to separate standard commercial banking from hedge fund like behavior.
Lately, the conservative mainstream has taken to siding against such reforms. Typical free market rhetoric has led the way. It’s been suggested that a ban on prop trading would over-regulate the banks and inhibit growth. We also hear the usual arguments against corporate taxes which state that it such policies only hurt the end consumer. I’d like to offer an alternative point of view on this subject that I think libertarians (and Libertarians) should consider supporting. I’ll present my logic one point at a time.
1. Our System Encourages “Too Big To Fail”
Government Intervention Run Amuck: Bank Intervention
Mon, 04/20/2009 - 7:00am | posted by Katy Delay
My list of examples of the unintended consequences of government intervention in the marketplace gets longer and longer. This time, I’m going to point out the latest irony: Investment banking’s profitable last quarter.
This would be wonderful news if it were genuine, but looking a little deeper reveals the truth. First, in one of Barron’s feature articles by Andrew Bary, we learn about a little-discussed fact: Goldman Sachs has only been able to issue low-cost debt due to the backing of the FDIC through a program called the TLGP, or Temporary Liquidity Guarantee Program.
Why Has The FED Acted As If The World Is About To End? Here’s Why:
Fri, 10/31/2008 - 8:54am | posted by Austin Wilkes
Since the middle of the 20th Century, when the Federal Reserve started compiling this measurement of non-borrowed bank deposit reserves there has been little short term deviation from its normal levels. Long Story short - Bank reserves, other than those achieved through loans (usually FED funds market, or discount window) have evaporated.
Bailout “Fails” so Paulson Wants to Expand It
Tue, 10/14/2008 - 7:12am | posted by Austin Wilkes
Ever since the “billionaire bailout” of Wall Street passed nearly two weeks ago, the market has signaled its displeasure in the goverment’s decision to shore up the failing system. The bailout passed on a Friday and the following week the Dow had its worse week in history. This created an environment where the Administration took hits for their “failed plan”- a plan that had not even been put into practice. But since markets look forward, expectations of the effects of the plan helped bring about the miserable week on Wall Street.
Former FDIC chairman slams TARP
Tue, 12/01/2009 - 1:00pm | posted by Jason Pye
Bill Issac, former head of the FDIC, says TARP made bad situation worse:
The problems bedeviling banks today could have been a lot less damaging, too, Isaac said, if not for the government’s response, which he said promoted a crisis mentality with public statements and inconsistent policies.
Isaac ripped the federal Troubled Asset Relief Program, which allowed the purchase of up to $700 billion in mortgages and other toxic loans.
“I still believe it was a horribly bad idea,” he said.
Isaac criticized the inconsistent treatment of troubled financial institutions.
“We handled one transaction after another in an ad hoc fashion without giving people any sense that anybody was in charge and knew what they were doing,” he said.
Some banks were bailed out, he noted, while others were allowed to fail.
Not only did TARP allow the government to pick winners and losers, which isn’t new territory, it is going to lead to more bailouts in the future, more housing bubbles, because Congress, the President and the Federal Reserve have not figured that they are what got us here. It wasn’t the free-markets or capitalism, it was constant government intervention and an entitlement mentality…that every deserves the “American dream” without really doing anything to earn it.
That is why the past is the present and the future.
FDIC Fund Declined 20% In Second Quarter
Thu, 08/27/2009 - 5:48pm | posted by Doug Mataconis
Another sign that the banking crisis isn’t necessarily over:
WASHINGTON (AP) — With bank failures rising, the government’s deposit insurance fund fell 20 percent to $10.4 billion in the second quarter, the Federal Deposit Insurance Corporation said Thursday. United States banks also lost $3.7 billion in the quarter.
The F.D.I.C. said Thursday that surging levels of soured loans at banks dragged down profits in quarter. The $3.7 billion loss for all banks compared with profits of $7.6 billion in the first quarter, and $4.7 billion in the period a year ago.
The F.D.I.C. also said the number of banks deemed to be in trouble jumped to 416 from 305 at the end of the first quarter. That was the highest number since June 1994 during the savings and loan crisis. Total assets of troubled institutions surged to $299.8 billion from $220 billion in the first quarter.
Eighty-one banks have failed so far this year, and hundreds more are expected to fall in coming years because of souring loans for commercial real estate. That threatens to deplete the F.D.I.C.’s fund, which guarantees deposits of up to $250,000 per account. The new level of the insurance fund puts the ratio at 0.22 percent, compared with the congressionally mandated minimum of 1.15 percent.
This is going to continue to get worse and, if we end up with a double dip recession as some have forecast, it could get much, much worse.
The Geithner Plan
Wed, 03/25/2009 - 11:59am | posted by Matt Wittlief
Yesterday, the details of Geithner’s new plan to address the banks’ toxic assets was released. He also penned an op-ed in the Wall Street Journal and appeared on CNBC (not sure of other media appearances). The U.S. Treasury website has also released a wide array of information regarding the plan - this is a good place to start if you want to read some of it.
Another Bank Fails - 9th In 2008
Fri, 08/22/2008 - 11:55pm | posted by Shana Kluck
Market Watch is reporting that on Friday, Federal & State (Kansas) regulators shut down the 9th bank so far this year. The Columbian Bank and Trust Company was partially sold to Citizen’s Bank and will reopen Monday under that name with an influx of capital provided by the FDIC.
