Can the FDIC really cover everyone if all the banks fail?
Nowhere close. The FDIC has $45Bn in deposit insurance; had WaMu gone under, it would have cost more than $100Bn to cover the insured deposits. Which meant that FDIC would have had to get a loan from the Treasury, and in turn dramatically increase the premiums it charges to member banks; banks that are already capital-constrained and unable to borrow from each other.
The big issue, though, isn't bank failure per-se, it's the total absence of money available for corporations to borrow. No corporate lending = massive business failures = massive job losses = Depression.
At the very least it'll make the current recession worse.
Oh no, I definitely get that. When small business can't get bridge loans to make payroll and everyone suddenly has no money to pay their employees people will start to "get" it, but then it will be too late.
It's happening and then some. In the residential construction industry in the suburbs of Philly, it's been happening for over a year. ratphooey sees the big stuff, but the number of plumbers, carpenters, electricians, etc. who are up against the wall because of late payments by general contractors in small-to-medium sized developments is *huge*.
Oh yes. My local person voted yes -- I figured she would.
See, I'm old school Wall Street enough to think, 'But the Lehman Brother's Building got sold in 1993 and hasn't had its name on it in years' -- when I worked with Lehman they were in the WFC. Where were they more recently?
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Nowhere close. The FDIC has $45Bn in deposit insurance; had WaMu gone under, it would have cost more than $100Bn to cover the insured deposits. Which meant that FDIC would have had to get a loan from the Treasury, and in turn dramatically increase the premiums it charges to member banks; banks that are already capital-constrained and unable to borrow from each other.
The big issue, though, isn't bank failure per-se, it's the total absence of money available for corporations to borrow. No corporate lending = massive business failures = massive job losses = Depression.
At the very least it'll make the current recession worse.
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Actually, this is already happening.
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See, I'm old school Wall Street enough to think, 'But the Lehman Brother's Building got sold in 1993 and hasn't had its name on it in years' -- when I worked with Lehman they were in the WFC. Where were they more recently?
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