Monday, November 2, 2009
All Clear For Banks
"The worst is far from over. The FDIC says 416 banks are at risk of failure, up from 117 a year ago. ... Despite these numbers, the banking system is no longer at risk of collapse. Megabank JPMorgan Chase, for instance, announced on Oct. 14 it earned $3.6 billion in the third quarter. ... Two years ago, the FDIC had about $52 billion in its deposit-insurance fund. Today that fund is technically broke. ... The run on FDIC funds is raising questions about how well the agency has contained the costs of the credit crisis. Bank failures are not of the FDIC's making: the [Fed] failed to reign in mortgage-lending, while regulatory agencies like the [OTS] allowed banks to make loans without adequate capital. But the FDIC has the final say on when and how to close a bank, and some believe it has been waiting too long to act, adding to the cost of failures", my emphasis, Stephen Gandel at Time, 26 October 2009, link: http://www.time.com/time/magazine/article/0,9171,1930508,00.html.
Does the FDIC have the "final say" on when to close a TBTF? Is the "banking system" the 19 TBTFs?