Another One Bites The Dust
MSNBC tells us that Citigroup buying Wachovia banking operations
NEW YORK – In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.
Citigroup will absorb up to $42 billion of losses from Wachovia’s $312 billion loan portfolio, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.
The FDIC says that Wachovia didn’t “fail” and they just “assisted” in the purchase. Yeah, right.
This was the last of the major banks with problems, so what is Congress mucking about for?
9 comments
It appears that Bernanke and the FDIC have decided that a general federal bailout will not happen, and have taken things into their own hands. The overall goal has to be to prevent bank collapses, because that is what torpedoed the economy in 1930-1932. Bailouts where troubled banks are taken over by untroubled banks with the Fed or FDIC taking on the troubled assets will accomplish that, and can be accomplished simply by the Fed cranking up the printing presses to replace the assets that must be marked down. It perhaps is a slower and uglier process than a Congressional bailout, but given that they apparently have adopted this strategy in place of the Congressional bailout, it appears the need for a Congressional bailout is, as you note, a dead letter.
= Badtux the Finance Penguin
that’s the best header yet!
I think there will be something of a bailout, Badtux, but I can’t see anything along the lines of what was proposed. They might actually consult some economists and banking experts this time to define the problem so they can design a solution. They also need to explain the situation and solution to the voters.
Ah, you must have chanced upon the McKinley, Hipparchia.
yep. well done.
Fortunately it only required cut and paste.
The Irish Government has just announced that it will guarantee all bank deposits to stop a run on banks.
Ireland’s government said today it will guarantee all the deposits, covered bonds, senior debt and dated subordinated debt of four publicly traded banks and two building societies.
That actually makes sense. Perhaps this is something the US should be doing. It would stop bank runs, stop panic, and give Congress time to work out a better plan. Instead of throwing $700 down a black hole.
The US and the UK both need to do it or there will be capital flight to other countries. The FDIC is funded by the banks, and it is in the interest of banks to reassure big depositors that their money is safe or everyone with more than $100K in an account will start moving money around.
The $100K limit should have been raised years ago.
The $100K limit should have been raised years ago.
yes, that would have helped. a lot. if people knew that several years worth of living expenses were safe from the robber barons, there wouldn’t be all this panic.
oh.. wait… the robber barons need to be able to invoke panic so that we’ll hand them our piddly little savings like this whenever they paint themselves into corners.
It’s time to give some reassurance to voters and taxpayers that problems that they care about are being addressed.