The Next Big-Gov Bailout
Source: http://feedproxy.google.com/~r/ContrarianProfits/~3/Bi8lQZtTuCE/20648Posted on Tuesday, September 22nd, 2009 | In Investing Lessons, Market Commentary
Looks like another government arm will soon be knocking on the Treasury’s door: “We are currently considering all options, including borrowing from the Treasury,” said FDIC chairwoman Sheila Bair. As we’ve forecast many times, the steady collapse of banks around the U.S. has put an irreparable dent in the FDIC deposit insurance fund.
Now likely less than $10 billion strong and with more bank failures sure to come, the FDIC faces two choices: Raise their taxes on banks to bolster the fund or tap the Treasury. Given the health of the U.S. banking system and the tendencies of our government over the last decade, you can probably guess which Bair will chose. Here’s another hint… Barney Frank, leader of the House Financial Services Committee, has already publicly opined on what Bair should do.
The FDIC has the authority to borrow as much as $500 billion through 2010.
“Stock market bulls aren’t concerned about the inevitable acceleration in bank failures — at least for now,” Dan Amoss told his Strategic Short Report readers just before Irwin’s failure. “Even though deposits will be insured against loss, the loss of local banks will still have a depressing effect on hundreds of small communities. These communities are going to lose their only access to business credit when their local zombie banks — loaded with toxic construction or commercial real estate loans — are liquidated or merged into other weak banks.
“Meanwhile, the latest monthly figures show that commercial bank balance sheets are shrinking at a fairly rapid rate, due to a combination of several factors: loan charge-offs, older loans being paid back at a faster rate than new loans are being made and regulators pressuring banks to build larger capital buffers.
“So credit-fueled growth in consumption or investment is not occurring. Combine this with stagnant or declining wages and corporate profit margins and it becomes hard to imagine how GDP will rebound on a sustainable basis.”
Source: The Next Big-Gov Bailout
Last 5 posts by Contrarian Profits
- The Biggest Financial Deception of the Decade - January 7th, 2010
- Bernanke’s Folly – Bursting the Housing Bubble or ‘Why more regulation isn’t the answer’ - January 6th, 2010
- Commercial Real Estate – why now’s the time to buy! - January 4th, 2010
- The Trade of the Decade - December 29th, 2009
- The Real Story Behind Solar Energy in 2010 - December 28th, 2009
ContrarianProfits.com is a financial news and opinion website with a twist. As investment guru Rick Rule puts it, “You are either a contrarian or a victim.” In the financial world, most people are losers because they just don’t know what game they’re playing. They think they can just get “into the market” along with everyone else, do what everyone else does, and they will make money. Not likely. By the time you’ve paid commissions, spreads, fees, taxes – and suffered the consequences of inflation – you’ll be very lucky just to have as much money as you started with.
ContrarianProfits.com is a contrarian site, in the sense that we provide ideas, opinions and recommendations that often run counter to the mainstream financial press. We do this not just to be contrary, but because we’ve realized that Rick is right. You don’t make money by following the crowd; you make money by leading it.
Why is this so? Well, it’s obvious that if you do the same thing everyone else does you’ll get the same results everyone else gets. On average, and over the long run, real investment returns for the typical investor cannot exceed the rate of growth of the economy itself. Everybody can’t get richer faster than everybody else. Real economic growth in the US today averages about 3% per year; if you don’t make any mistakes, that’s about what you can expect. Few people may be satisfied with 3% per year, but most feel comfortable in the middle of the financial herd and are happy to take whatever that gets them. If you’re one of those people, you will probably not like our site. It will make you uncomfortable.
If, on the other hand, you’re willing to look at things a little differently, you’ll appreciate the views of many of our columnists, contributors and visionaries.
No recommendations, either expressed or implied, are being made to buy, sell, hold or short any of the mentioned stocks. No legal, tax or accounting advice is expressed or implied. Always contact your attorney, CPA, or tax advisor before acting on any legal or tax issues. StraightStocks.com is not responsible for the content, products, or services of any of the advertisers on this site. StraightStocks.com receives compensation from advertisers on this blog. Services and products referred to herein are trademarks, registered trademarks, servicemarks, and/or registered servicemarks of their respective trademark or servicemark owners.
September 22nd, 2009 at 1:13 pm
[...] the FDIC faces two choices: Raise their taxes on banks to bolster the fund or tap the Treasury. The Next Big-Gov Bailout – straightstocks.com 09/22/2009 Looks like another government arm will soon be knocking on [...]