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Economy
Another Friday, another bank failure
2009-09-26
Hat tip Instapundit
Another Friday, another bank failure. The Georgian Bank, which 99% of most Americans had never heard of until today, will cost the FDIC approximately another one billion dollars. But there is a difference between the bank failures that have been announced during the past year and the bank failures (Lehman) and close calls (Wachovia, Washington Mutual, Merrill Lynch) that convulsed the United States financial system one year ago. The difference is that the FDIC and the Federal Reserve, having learned from the experience of 2008, are letting the air out of the balloon slowly now. Instead of a tidal wave of failures the United States government is simply allowing a slowly rising tide of financial insolvency to flood the U S economy.
It's going to continue, one way or another, until every single unacknowledged insolvency is worked through. We knew that when the dimensions of the problem became clear, last October or thereabout, so this isn't really news, just confirmation. The inside of President Obama's head must be an unhappy place, each day waiting for the next one to appear.
Posted by:g(r)omgoru

#4  Even the Fed's printing presses have only printed so much.

Well, they can always outsource to the Norks. I understand they make some really nice copies. Money for food. There's a concept. On the other hand, if the Fed keeps inflating the money supply it'll just be cheaper for us to print the small denominations on our own computer printers at home and let the Fed handle the bigger bills.
Posted by: Procopius2k   2009-09-26 17:03  

#3   There seems to be a widely held although tacit agreement between the Fed, the legislature & the MSM not to talk about widespread bank insolvency for fear of triggering a national run on the banks. There is only a small fraction of currency available for people to withdraw from banks and carry as such. Even the Fed's printing presses have only printed so much.
Posted by: Anguper Hupomosing9418   2009-09-26 14:58  

#2  The "soft landing" approach seems like a good idea, until you realize that there are about 1800 more banks that either need to go bust, or are terribly weak. The "zombie" banks include some really huge ones, like BoA.

The problem happens when suddenly there is a surge of banks that have to close *now*, generally because a group of major business leases have come due all at once. The FDI Act requires that the money can only come out of the FDICs account. So if too many banks fold too fast, they have to be part of a bank holiday until the funds are made available by the Treasury.

Combined with the FDIC having to "force" buyouts by stronger banks, weakening them.
Posted by: Anonymoose   2009-09-26 13:21  

#1  Dead horse. should have rechartered Hamilton's First Bank of the United States for 12 years and simply absorbed all these institutions. At least the people would end up holding the assets as well as the absorbing the debts.
Posted by: Procopius2k   2009-09-26 10:20  

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