"We were told, when all of this started, that our economy was under threat of imminent collapse. Why hasn't it happened yet?"
It seems that was a political viewpoint and not an economic one. The economists were only slightly less alarmist in that they didn't feel the economy would collapse entirely, but would sustain a prolonged and difficult blow that may be unbearable for homeowners or investors.
"Why is the Senate proposing an increase from $100k to $250k of the per-account amount that the FDIC insures as part of their bailout bill re-write when banks and bank deposits aren't the entities and assets currently in jeopardy?"
In the event that one of the admittedly brilliant sell offs orchestrated by the FDIC fails and no buyer wants the assets, the result would be the loss of all the accounts, investment or otherwise, held by members of the bank. That includes standard savings account type assets. This scenario nearly played out recently when one of the banks was unable to find a buyer. I forget which. Fortunately for members of that bank, they were eventually bought out.
"Why did Treasury Secretary Paulson, who refused to help the failed Lehman Bros. (ostensibly because the market was strong and working itself out), suddenly reverse position when his friends at Goldman Sachs got in trouble?"
The pessimist in me wants to agree with you here, and perhaps it was a factor. But back when Lehman Bros. tanked it was a single incident where Goldman Sachs is clearly one of many in dire straits at the moment. As a former Goldman Sach's CEO, Paulson should really be held to the fire for his judgement here, but it may actually be an honest reaction to a different reality than the Lehman situation.
"Why have we not heard much about the fantastic and efficient job the FDIC is doing of siezing failing companies and selling off their assets without taking a hit to their insurance funds?"
While these efforts have been truly miraculous, they rely on there being a buyer on the other end willing to take on the bad assets. This has almost failed on one account already though Chase eventually bought out Bear Stearns. The devaluation of the stock that occured in the few days it took to talk Chase into it nearly forced Bear Sterns to completely fold, which would have resulted in FDIC claims that would jsut about tap the program dry. An argument has also been made that if the solid institutions buy up too much of the risky assets, we'll be bailing them out in a few months.
So far the banks have been fine (they just can't raise any of their own money), except for that one worth $300 billion. (was that WaMu?) But they were a "thrift", so I'm not sure what that means.
Banks might well be next, but so far so good.
My question is, even if they raise the insured amounts, are they just counting on people feeling more secure and not pulling their money out? That's not really happening right now (not yet, anyway). But if a bank DOES fail and they have to raid the insurance fund, exactly how are they going to cover the 150% greater depoist amounts? Where are they going to get the money now, charge the banks more? They already have a hard enough time raising money. That would just make it worse, not better.
It seems that was a political viewpoint and not an economic one. The economists were only slightly less alarmist in that they didn't feel the economy would collapse entirely, but would sustain a prolonged and difficult blow that may be unbearable for homeowners or investors.
"Why is the Senate proposing an increase from $100k to $250k of the per-account amount that the FDIC insures as part of their bailout bill re-write when banks and bank deposits aren't the entities and assets currently in jeopardy?"
In the event that one of the admittedly brilliant sell offs orchestrated by the FDIC fails and no buyer wants the assets, the result would be the loss of all the accounts, investment or otherwise, held by members of the bank. That includes standard savings account type assets. This scenario nearly played out recently when one of the banks was unable to find a buyer. I forget which. Fortunately for members of that bank, they were eventually bought out.
"Why did Treasury Secretary Paulson, who refused to help the failed Lehman Bros. (ostensibly because the market was strong and working itself out), suddenly reverse position when his friends at Goldman Sachs got in trouble?"
The pessimist in me wants to agree with you here, and perhaps it was a factor. But back when Lehman Bros. tanked it was a single incident where Goldman Sachs is clearly one of many in dire straits at the moment. As a former Goldman Sach's CEO, Paulson should really be held to the fire for his judgement here, but it may actually be an honest reaction to a different reality than the Lehman situation.
"Why have we not heard much about the fantastic and efficient job the FDIC is doing of siezing failing companies and selling off their assets without taking a hit to their insurance funds?"
While these efforts have been truly miraculous, they rely on there being a buyer on the other end willing to take on the bad assets. This has almost failed on one account already though Chase eventually bought out Bear Stearns. The devaluation of the stock that occured in the few days it took to talk Chase into it nearly forced Bear Sterns to completely fold, which would have resulted in FDIC claims that would jsut about tap the program dry. An argument has also been made that if the solid institutions buy up too much of the risky assets, we'll be bailing them out in a few months.
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Banks might well be next, but so far so good.
My question is, even if they raise the insured amounts, are they just counting on people feeling more secure and not pulling their money out? That's not really happening right now (not yet, anyway). But if a bank DOES fail and they have to raid the insurance fund, exactly how are they going to cover the 150% greater depoist amounts? Where are they going to get the money now, charge the banks more? They already have a hard enough time raising money. That would just make it worse, not better.
~Sean
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