3-17-2014: After other lawsuits against large banks due to the LIBOR (London Interbank Offered Rate) “rate fixing” scandal, the FDIC has jumped in to sue 17 large banks claiming they colluded to manipulate the rate and it subsequently affected the closure of 38 “failed” smaller banks through LIBOR’s manipulation.
Not much to say for its success as of 2013 except that only about 4 million homeowners have been assisted and of those, about 46% have re-defaulted.
12-19-2013: J.P. Morgan sued FDIC over their role of “encouragement” to eat Washington Mutual and their belief that FDIC agreed to protect certain WaMu liabilities from JP Morgan’s responsibilities. Source: WSJ, 12-18-2013, C1.
10-22-2013: In addition to insuring the 6,900 US banks, FDIC warns of liquidity issues and future bank failures given rising interest rates and sufficient liquidity to pay short term higher rates with long term low rate bond revenue. Source: WSJ, 10-9-2013, C3.
4-11-2011: The $75 Billion FDIC Homeowner Affordability and Stability Plan (another $200 billion was authorized for Fannie Mae & Freddie Mac) (www.financialstability.gov) is a comprehensive plan designed to help 9 million responsible homeowners avoid foreclosure by providing affordable and sustainable mortgage loans.
Loan Modfications – ($50 Billion) – Treasury plans to make mortgage payments affordable and sustainable for middle-income American families that are at risk of foreclosure.
Refinancing – ($25 Billion) Borrowers who are current on their mortgage but have been unable to refinance because their house has decreased in value may now have the opportunity to refinance into a 30-year, fixed-rate loan.
FDIC plans to sell some real estate connected to CMBS (Commercial Mortgage Backed Securities)
The real estate for sale will come from the over 300 failed banks since the mid 2000’s.
The real problem will be the perceived market valuation of these physical properties and the anticipated market values that the FDIC thinks they’re worth.
The FDIC intends to open up more than $500 million in loans to see the associated real estate secured by those loans, but I think that the total current market value of some of those properties purchased during the real estate craze in the mid 2000’s may be 30-50% less than loan value based on what I have seen or heard about property values. Also, FDIC has $34 billion in assets from failed banks up for sale…no telling how many others are on FDIC books not yet up for sale, or those pending bank failures.
Source: WSJ 10-20-2010, C6
FDIC – Federal Deposit Insurance Corporation – What’s it up to?
WSJ 10-13-2010: The Financial Stability Board (group of regulators, central bankers and international finance ministries) are set to propose stricter capital requirements and plans by firms on how they should be dismantled. The FDIC plans to prevent any payments to shareholder/long term debtholders in the event of a firm’s failures to prevent funnelling money that could have been used to pay some creditors. The Treasury department objects to the FDIC control discretion and fears some creditors would leave when signs are telling them the end is near (or just doesn’t like to share their power). But FDIC’s stance is the “clawback” provision (i.e., go back and collect money from someone who shouldn’t have received the amount). The FDIC can also charge a fee in financial industry to cover some expenses to try to prevent taxpayer .money for any bailouts.
10-8-2010: FDIC targeted 50 executives and directors of failed banks to try and recover about $1 Billion in losses charging negligence or misconduct. Note: 287+ banks have been closed since 2008. In July 2010, the FDIC sued four former IndyMac Bank executives for $300 million in damages but cost the FDIC $12.7 Billion.
10-8-2010: Government regulators plan to create new rules for FDIC to use their discretion when sizing and dismantling a large financial firm (in a non market disruptive manor) and settle creditor claims based on critical nature to keep operations going or maximize the value of the firm. In other words, all creditors will lose money – it’s just that some will lose more of their exposure than others.
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