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FDIC wants pension funds to prop up failed banks
Over 140 U.S. lenders folded in 2009 alone. To remedy the financial void left in their wake, the Federal Deposit Insurance Corporation wants public pension funds, which safeguard the retirement funds of millions, to buy in part or in whole the banks that couldn't manage to keep their depositors' funds."Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets," anonymous sources reportedly told Bloomberg News.
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Bloomberg News notes that pension funds in Oregon, New Jersey, California and New York may participate. The wire service also reported that firms being targeted for the plan control over $2 trillion in retirement funds.
"Investing in distressed banks doesn’t always pay off, as the U.S. Treasury Department learned with the Troubled Asset Relief Program," Bloomberg added. "At least 60 lenders skipped some of their promised dividends to the TARP fund, according to SNL Financial, and a $2.33 billion stake in CIT Group Inc. was wiped out last year when the lender went bankrupt."
http://rawstory.com/2010/03/fdic-pen...-failed-banks/
Over 140 U.S. lenders folded in 2009 alone. To remedy the financial void left in their wake, the Federal Deposit Insurance Corporation wants public pension funds, which safeguard the retirement funds of millions, to buy in part or in whole the banks that couldn't manage to keep their depositors' funds."Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets," anonymous sources reportedly told Bloomberg News.
...
Bloomberg News notes that pension funds in Oregon, New Jersey, California and New York may participate. The wire service also reported that firms being targeted for the plan control over $2 trillion in retirement funds.
"Investing in distressed banks doesn’t always pay off, as the U.S. Treasury Department learned with the Troubled Asset Relief Program," Bloomberg added. "At least 60 lenders skipped some of their promised dividends to the TARP fund, according to SNL Financial, and a $2.33 billion stake in CIT Group Inc. was wiped out last year when the lender went bankrupt."
http://rawstory.com/2010/03/fdic-pen...-failed-banks/
FDIC under strain. Meanwhile, the Federal Deposit Insurance Corp.'s fund has been dwindling, hitting a $20.9 billion deficit as of Dec. 31, as the AP reports. Suttmeier says TARP funds repaid by bailed out banks should be used to shore up the FDIC's fund, rather than raising fees for banks, which will leave them with less capital to lend.
To be clear, the FDIC has a $500 billion line of credit with the U.S. Treasury, and Suttmeier doesn't see much risk of the FDIC changing (or being unable to cover) its $250,000 guarantee for individual deposits. Suttmeier isn't an alarmist and doesn't see run on the banks as started to occur in late 2008 in the depths of the global credit crisis. However, one trend is clear: "We have to find funding for the smaller banks," he says.
Nothing less than positive GDP growth and a sustainable U.S. recovery are at stake.
http://finance.yahoo.com/tech-ticker...22-437941.html
So 500 billion isn't enough ?
To be clear, the FDIC has a $500 billion line of credit with the U.S. Treasury, and Suttmeier doesn't see much risk of the FDIC changing (or being unable to cover) its $250,000 guarantee for individual deposits. Suttmeier isn't an alarmist and doesn't see run on the banks as started to occur in late 2008 in the depths of the global credit crisis. However, one trend is clear: "We have to find funding for the smaller banks," he says.
Nothing less than positive GDP growth and a sustainable U.S. recovery are at stake.
http://finance.yahoo.com/tech-ticker...22-437941.html
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