The banking system is still suffocating under the weight of bad loans, and it's well known that the FDIC doesn't have enough cash to deal with the problem.
With the FDIC’s staring at an incredibly shrinking deposit insurance fund, it’s no wonder that Sheila Bair is out about talking about the regulators looking at options to replenish it. That includes tapping the $500 billion line of credit the agency has with the U.S. Treasury put in place for a rainy days.
It looks like Citi is on a mission to prove it doesn’t need any stinking help from the federal government. Earlier this week it tapped the bond market for $5 billion, but the notes carried the FDIC guarantee. As the FT noted in its piece yesterday, the move seemed at odds with the bank’s supposed attempts to get out from under the government’s thumb.
When the subprime lending market fell off a cliff and the housing market with it, trying to figure out what the mortgage loans and bonds were truly worth became a pointless exercise since no one could agree when home prices would stop falling. Banks didn’t want to sell the assets at a steep loss since they hoped (and prayed) in the long run many of these loans and bonds would continue to perform. Buyers, of course, wanted to be compensated handsomely for the risk of taking on these loans when prices continued to plummet and the ranks of jobless swelled.
from Rolfe Winkler:
Headlining this week's bank failures is Corus out of Chicago. Condo loans in Florida and other bubbly states did 'em in. There's an odd item in the press release. It lists the bank's deposits as "approximately" $7 billion. I can't remember seeing that modifier in a bank failure press release. When you read enough of them, the littlest things jump out at you...
The U.S. insurance fund for bank deposits is running out of money. At the same time, some of the big institutions that received federal bailouts last fall have repaid more than $70 billion to the Treasury Department, and more checks to the government may be in the mail soon.
The Federal Reserve is fighting hard to keep details about the $2 trillion in emergency loans it has made during the financial crisis from seeing the light of day. And now it seems the Federal Deposit Insurance Corp. also has started playing the game of keeping secrets from the public.
from Rolfe Winkler:
There's good news and bad news in the FDIC's quarterly profile of the banking sector. The good news is that FDIC has more resources than you think to handle the problem banks on its radar. The bad news is that the too-big-to-fail banks aren't on it.