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Posts Tagged ‘FDIC coverage’

I’ll Gladly Pay You Tuesday…

Posted by Larry Doyle on December 3rd, 2009 9:26 AM |

Postponing losses in hopes that one can trade out of them is a game very rarely won. In similar fashion, not acknowledging losses in hopes that the situation improves and the loss is mitigated is also a recipe for disaster. All one needs to do is look eastward to Japan to realize that. Ultimately, a loss not only must be realized, but paid. “I’ll gladly pay you Tuesday for a hamburger today …” may be cute in cartoons, but in the real world that approach never works. That said, this ‘delay to pay’ is the exact approach being utilized by Uncle Sam and, in large measure, by private industry.

Bloomberg’s Jonathan Weil once again distinguishes himself and provides great insight on this dynamic in writing, Fudging Losses is Easy When the FDIC Does It Too:

No wonder so many banks are delaying their losses. The Federal Deposit Insurance Corp. keeps showing them how, by doing the same thing with its own.

Last week the FDIC, led by Chairman Sheila Bair since 2006, said its insurance fund’s liabilities exceeded assets by $8.2 billion as of Sept. 30. That marked the first time since 1992 that the industry-financed fund had shown a deficit. There’s plenty of reason to believe its financial health is much worse.

How much worse? (more…)






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