Here's a nice little economics lesson for us courtesy of Left Coast Rebel.
* There is a great comment in my comment section about this also. You should check it out, and then continue researching this as I am. :o)
A Post Argument World
5 weeks ago
Joie, this story is a viral internet story which parses the truth to arrive at an insidious plot.
ReplyDeleteYes, a group of investors including Soros et all purchased the assets of IndyMac at a discount. But they will suffer 100% of the first 20% of losses under the loss-share agreement with the FDIC. Only after that will it cost the FDIC a dime. So far the FDIC has paid NOTHING under that agreement. Beyond that, the FDIC pays 80% of the next 10% and 95% of the remainder. But if no one had bought those assets, the FDIC would be on the hook for 100% percent of it!
The assets were a SELECTED portfolio of single-family residetial mortgages and OneWest is required to continue the test-bed modification program.
Contrary to the article, the FDIC has NOT announced they will tap their line of credit with the Treasury. They are requiring banks to pay pre-paid assessments to replenish the DIF. The FDIC DIF is a bank funded insurance fund. Even if the FDIC tapped the treasury line, it would have to pay this back with interest. And that money would come from BANKS. Taxpayers would only be making a loan to keep banks liquid and in operation.
Using equity investors is new to bank resolutions, but it's necessary because of the size and number of banks which will fail. The FDIC won't find a bank to acquire all failed banks. And do we want banking to become more concentrated? The investors are basically just fast-track de novo bankers.
There will be many more failed banks this year than last year. We need to avoid the hysteria of needless bank runs. No depositor has lost a single cent in the 76 year history of the FDIC.
The person spreading this lie talks about his "client" who is having trouble short selling his house. As I said, OneWest has not exhausted their first 20% of losses yet and they are in no rush to lose money they wont get back. The anecdote is either a complete lie or a mischaracterization of truth. The borrower is a deadbeat who thinks he has a right to a principal writedown and his lawyer or representative is claiming that it doesnt make sense and there is a government plot to make Soros and Co. rich. The FDIC is committed to least cost resolution to bank failures. They have no interest in helping billionaires and billionaires have no influence on the resolution process.
Thanks Nick for sharing your info. and knowledge on this subject. I personally am still navigating it. Your insight on this matter does make sense to me, and it is certainly believable to me that the home owner could very well be a dead beat, as there seem to be so many in America lately. Thanks again!
ReplyDelete