When a Bank Fails

Fine. Let FDIC be optional in red states. They want out? Let them out. Let them lose their assets when their greedy bankers go under. Stop whining.

Pride goeth…before a fall.

I thought Obama saved the banking system? Here we are 2 years into his term and banks are failing at record rates.
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139 have closed year to date after 140 closed in 2009 while only 25 closed in 2008 and 3 in 2007 (Bush was an underachiever again).

And the FDIC has over 800 banks on their “problem bank” list..

Do you EVER have a point, freeper?
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Seriously. If you don’t like what Obama did — and that’s fine, I’m not a big fan of what Obama did — feel free to explain what you would have preferred him to do and explain why your policies would have kept the banks from being taken over by the FDIC.
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Otherwise, STFU.

The point is the sanctimony of the left. Always have all the answers and if you doubt it just ask them. Obama has spent trillions at this point re-distributing taxpayer money to political allies and has done nothing to actually help the majority of Americans.
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These small banks are dying from regulations as the are required to mark every loan to market at a time the entire market is in distress. Economic choking regulation at a time common sense is needed followed up by more regulation.
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So instead of having a chance to work out the loans, the taxpayer will be the banker.

I feel the need to repeat something Paul Krugman says often, “economics is not a morality play” yeah we enabled irresponsible behavior to a degree but the costs of letting it all go down the tubes are much greater than the costs of any bailouts.

Let’s be clear about something Obama didn’t save the banks. TARP was the idea of Secretary Paulson under Bush. Yes, Obama as a still sitting Senator voted to go along with it as did a majority of Republicans. Now that that is out of the way. TARP was not designed to save the banks it was designed to to prevent the collapse of the monetary system and thus our economy. Next, because so much of the US monetary system and economy was tied to the largest financial institutions they were prevented from going bankrupt.

Now there are equally compelling argument on both sides as to whether this was necessary or not. Alas without a time machine we cannot go back and prove that it was not necessary. However, since you and I as tax payers have not lost our shirts, as was predicted by many on the far right I am willing to give the benefit of the doubt that it was the right thing to do at the time.

Could it have been better designed, of course. As could anything when done as a reactive measure instead of a proactive measure.

Freeinpa
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I’m going to keep it relatively simple without resorting to your brand of nonsense argument.
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We know why banks are failing and it’s not because of ‘over regulation’. They’re in the hole they are right now BECAUSE of poor or weak regulation. The failure of banks are not because Obama paid of cronies…the banks are failing because of BAD business.
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Our local bank belongs to a Canadian owner and they’re doing just fine and expanding. The reason being that they had to go by their owner bank regulation. They were not allowed to approve the kind of stuff our banks did.
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The irony of course is that you can’t articulate the problem without blaming something else; banks are dying because they’re not being bailed out. And you don’t want them to be bailed out. Your catch 22 is that while you blame Obama for not bailing them out you invent the whole ‘over regulated’ BS in order to cover for banks that simply can’t cover for the problems they got themselves into by approving loans without a sound finansial basis for.
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“So instead of having a chance to work out the loans, the taxpayer will be the banker.”
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Yes – we will, but not because of regulation; because we’re not bailing out smaller banks that used bad practices. So what is it, bail them out so they can work with the end users and maybe we get the money back or let them fail and we end up on the hook for all the liabilities?
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You can blame regulation all you want but banks are failing at the rate they are because of bad business practices. They did it before the new ‘finance’ regulation and they got themselves into the car wreck because of lack of regulation.

“We know why banks are failing and it’s not because of ‘over regulation’. They’re in the hole they are right now BECAUSE of poor or weak regulation”
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When you start with an incorrect assumption the rest of your argument fails. Banking is the MOST regulated industry we have. Federal Reserve, Comptroller of the Currency, FDIC, State banking commissions, and they get annual audits. And for good measure the DOJ which was used as a club to get banks to lend to meet certain “social goals”. Most sold the loans to Fannie and Freddie who are GSE’s and were regulated by Congress. And we have Barney Franks word that they were both solid.
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Now miraculously these same agencies are going to do a bang up job?
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Now leaving aside the nonsense of regulation is the cure, it would be easier for the smaller banks to work out their loans locally than turn the keys over to the FDIC. Remember the S&L crisis? More government interference. Fortunes were made by investors playing government regulators for fools.

“Most sold the loans to Fannie and Freddie who are GSE’s and were regulated by Congress. And we have Barney Franks word that they were both solid.
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Now miraculously these same agencies are going to do a bang up job?
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Now leaving aside the nonsense of regulation is the cure, it would be easier for the smaller banks to work out their loans locally than turn the keys over to the FDIC. Remember the S&L crisis? More government interference. Fortunes were made by investors playing government regulators for fools.”
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So what’s the issue? No or weak regulations, no one at the helm or what? What you’re saying is that there’s regulation but no one enforced them? Okay, so why are the banks failing? The economy or none enforced regulation? Can you stumble even more over your own logic?

there are many factors contributing to the failure of small banks but in Georgia they face additional hardships due to how they were formed during the chartering process. even if some of the older ones were organized correctly the additional pressures in the state from all the failures adds to their demise. so the many are affect by the few who abused the system and got away with it for awhile. when any bank is stressed for capital all the rules must be applied the same or our system will worsen. bankalchemist.

its not a red state or blue state cause and effect nor is it really along any party lines. regulations became stagnant over time and with the exponentially speed of the internet in a www economy no one agency could adequately track all the transactions. then you add in the systemic risk of very poor management, to few regulators in most states, and during the last 7 years a retraction of size of these regulators it was never if but only a matter of when. When to many folks are trying to game the system, and the system is not adequate then everyone using the system suffers. bankalchemist.

free,

Response?

BTW, do you have an explanation why so few credit unions have failed during this deresssion?

Is it possible that most of them hewed to CONSERVATIVE financial principles, and did not advocate or finance the kinds of super-risky mortgage loans that many banks did?

credit unions are not allowed to make commercial loans or “development loans” they did not invest in CDO’s or other synthetic wall street schemes as their charter does not allow them to. CU’s are strictly for consumers and the needs of individuals or families. bankalchemist.