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Reply #41: FSLIC couldn't either during the S&L deal [View All]

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DeschutesRiver Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Feb-20-09 01:27 PM
Response to Reply #35
41. FSLIC couldn't either during the S&L deal
Edited on Fri Feb-20-09 01:33 PM by DeschutesRiver
And the .gov got around that without resorting to nationalizaion. Nationalization isn't the only way to deal with an underfunded insurance program. It will be interesting to see what a "nationalized" bank is exactly; I don't think .gov has finalized the terms and conditions yet?

The FDIC claims to be backed by the full faith and credit of the U.S. Government, but I don't know what authority gives that status. Other than the obvious, ie without FFC in a situation that goes beyond FDIC resources, people will withdraw from the banking system and it will collapse into a smoking heap. And a certain percentage will never go back to it, a fact of which the .gov is quite aware and which is a pretty powerful incentive.

End of the day, regardless of whether .gov chooses to call its rescue a FFC backing of the FDIC insurance system, or a nationalization of every failed bank beyond FDIC ostensible limits, it is the same end result - taxpayer funded. And done in aid of making people continue to use and believe in the present banking system.

I don't think how a bank is deemed failed, ie whether taken over or sold or nationalized, will make a difference in analyzing the odds of a delay in access. Acknowledging the possibility of a delay in access is a reasonable assumption given what has gone on recently.

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