Sunday, August 23, 2009

FDIC incompetence - where did all the money go?

The FDIC has about 650 million left...

What i think is most disturbing is that given that the FDIC has been collecting insurance premiums for 76 years...lets just average it to a guesstimate of $1 billion a year (does not matter if its lower or higher - of course it was lower in the 40's and significantly higher than $1 billion for the last 20 years - [some banks have to pay 1 million dollars per year on 200 million of deposits - that's not chump change]).
So, how come they only had a maximum of 68 billion dollars in reserve to cover bank failures over the last several years?

I mean if i invested 1 billion into treasuries at 4% 70 years ago it should be worth over $15 billion today - theoretically they should have around $400 billion by now if they invested my basic assumption for the insurance premiums they received in aggregate at 4%...and quite likely more since interest rates were much higher than 4% for a long time and they likely have collected significantly more in premiums than 70 billion dollars. I would estimate (and keep in mind its only a estimate based in basic assumptions but certainly worth exploring) the the total in premiums FDIC was paid over 70 years is more likely significantly more than 700 billion dollars...(the last 20 years alone i believe they have charged around 300 billion in premiums) - at 4% they should theoretically have much more than a trillion in reserve...even taking into account the S&L crisis.

So, what did they do with all that money?

...and what's more if they can't even invest it properly in treasuries - how can they prop up a failing financial system?

Clearly they must be incompetent? Or they must be lying? Or could it be both?

This surely will infuriate the bank runs when they happen next year.

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