Last October 2008, I had written this post as we were about to descend into the midst of the “Great Recession”. As nearly a year has past, my predictions have been fairly accurate, and I’ve also attached some links from articles to add extend some legitimacy to my proposals and arguments.
The possibility of the FDIC going bankrupt is documented here: http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=alsJZqIFuN3k
The “closed door negotiations and strong-arming that I suspected is documented here: http://www.marketwatch.com/story/as-paulson-testifies-democrats-focus-on-lewis
My original post follows as below:
I think it is high time that Generation Y reassess their view on America’s place in the modern and world economy.
Let’s set something straight. I was born in 1987, but the first president that I can recall, was named Clinton. Growing up, I think it is fair to say, that we were presented with a very rosy, fairytale view of the world. The United States was far superior militarily, economically, and in the sense of prestige. Perhaps we were young and naive, but it almost seemed as if we couldn’t be touched.
Fast forward to our current situation in society. We are currently dragged down in a war that apparently we shouldn’t have been in, an economic situation and stock market that resembles the newest coaster at Six Flags, and as far as I am concerned, whoever coined “freedom fries” should be removed from the gene pool.
Let’s talk the bank failures. Does everyone know why we’re in this position, what just happened, and what’s coming up?
Anyways, here’s something we need to seriously consider. 11 federally insured banks have failed this year. As for the deposits, supposedly, the omnipotent FDIC will cover any deposits that we have in the bank, at least up to $100,000. The truth is, does the FDIC even have the money? Not a chance in hell. At least not until the government pumps more money into the FDIC, of which we taxpayers will need to foot the bill.
Let’s think about this for a second. When IndyMac failed, it cost the FDIC roughly 7-8 billion dollars. Well, just last week, we had “failures” of Washington Mutual and Wachovia. Wamu has a market capitaliztion of over 300 billion dollars. Obviously not all of this money is in the form of deposits, CDs, or other FDIC insured funds, and the closest estimates I have heard is that if Wamu were to be bailed out by the FDIC, it would cost the FDIC 48 billion dollars.
Guess what, the FDIC only has 45 billion dollars on tap.
See the problem here? Know what’s even scarier. I hear that Wachovia is a bigger bank than Washington Mutual.
Is it just me, or is it coincidence that Merill Lynch was acquired by Bank of America, Wachovia was acquired by Citibank, and Washington Mutual was acquired by JP Morgan all with a little “encouragement” by the government?
Ladies and gentlemen, think about all of this. What does the government do when it lacks the funds necessary to let a bank completely fail, so that it would be on the hook for the FDIC insurance policy payout? It should not be an impossibility that Capitol Hill and Wall Street are meeting for tea, and the politicians are “forcing/begging/encouraging” JP Morgan to buy out Washington Mutual, otherwise the FDIC would go bankrupt.
The mega corporations are bailing out the mega corporations, because the FDIC(government) can’t do it right now. Did anyone ever mention that, more than ever, corporations are running more of the world?