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Archive for March 5th, 2009

FDIC Could Be In Trouble!!

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Via(Bloomberg)

Bair Says Insurance Fund Could Be Insolvent This Year

By Alison Vekshin

March 4 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”

The FDIC last week approved a one-time “emergency” fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said.

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund.

Angry Bankers

Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank’s 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said yesterday in a telephone interview.

“I’ve never seen emotions like this,” said Fine, adding that he’s received more than 1,000 e-mails and telephone messages from angry bankers.

“The FDIC realizes that these assessments are a significant expense, particularly during a financial crisis and recession when bank earnings are under pressure,” Bair wrote. “We did not want to impose large assessments when the industry and economy are struggling. We searched for alternatives but found none better.”

The agency, which has released the change for 30 days of public comment, could modify the assessment to shift the burden to the large banks “that caused this train wreck,” Fine said. “Community bankers are feeling like they are paying for the incompetence and greed of Wall Street,” he said.

Legal Constraints

Bair dismissed that suggestion.

“For risk-based assessments, our statute restricts us from discriminating against an institution because of size,” Bair wrote.

The deposit insurance fund won’t dry up because the government can get funds from the industry and congressional appropriations, and borrow from the Treasury, Chip MacDonald, a partner specializing in financial services at law firm Jones Day, said today in a telephone interview.

“As a depositor, I am not worried in the least,” MacDonald said. “No one is going to let the FDIC go without any money.”

Consumers should watch this issue closely, said Edmund Mierzwinski, consumer program director at U.S. PIRG, a Boston- based consumer-watchdog group.

“I wouldn’t take their money out of the bank yet,” Mierzwinski said. “If the FDIC is saying that there is this serious problem, then we should all be concerned. I think there is a chance the FDIC is going to have to ask taxpayers for money in the future.”

No Taxpayer Funds

Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department and legislation pending in Congress would boost the amount to $100 billion.

“Banks, not taxpayers, are expected to fund the system,” Bair said. Asking for taxpayer support “could paint all banks with the ‘bailout’ brush.”

The FDIC “will revise the interim rule, if appropriate, in light of the comments received,” the agency said in a Federal Register notice.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net .

God Bless,
The Truth Tracker
Jason R. Bootie

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Wed. Night, oh Wait isn’t it Party Night @ the W.H.

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Via(DCExaminer)

Wednesday is party day at the Obama White House

President Barack Obama laughs with Stevie Wonder during the 'Stevie Wonder In Performance at the White House: The Library of Congress Gershwin Prize' in the East Room of the White House in Washington, Wednesday, Feb. 25, 2009. (AP Photo/Gerald Herbert)

President Barack Obama laughs with Stevie Wonder during the 'Stevie Wonder In Performance at the White House: The Library of Congress Gershwin Prize' in the East Room of the White House in Washington, Wednesday, Feb. 25, 2009. (AP Photo/Gerald Herbert)

The White House is the place to be on Wednesdays.

Since the presidency changed hands less than six weeks ago, a burst of entertaining has taken hold of the iconic, white-columned home of America’s head of state. Much of it comes on Wednesdays.

The stately East Room, where portraits of George and Martha Washington adorn the walls, was transformed into a concert hall as President Barack Obama presented Stevie Wonder with the nation’s highest award for pop music on Wednesday.

A week before that, the foot-stomping sounds of Sweet Honey in the Rock, a female a cappella group, filled the East Room for a Black History Month program that first lady Michelle Obama held for nearly 200 sixth- and seventh-graders from around Washington.

Cocktails were sipped during at least three such receptions to date, all held on Wednesdays.

Bookending the midweek activity were a Super Bowl party for select Democratic and Republican lawmakers and a dinner for governors, the new administration’s first black-tie affair. It was capped with a performance by the 1970s pop group Earth, Wind and Fire, and a conga line.

The flurry of entertaining is in keeping with the Obamas’ promise to make the White House a more open place for everyone.

The governors’ dinner was “a great kickoff of what we hope will be an atmosphere here in the White House that is welcoming and that reminds everybody that this is the people’s house,” Obama told the state chief executives after they had dined on Maryland crab, Wagyu beef, Nantucket scallops and citrus salad.

“We are just temporary occupants. This is a place that belongs to the American people and we want to make sure that everybody understands it’s open,” he said.

At the dinner in the State Dining Room, the Obamas looked comfortable, chatting and smiling with their guests. Afterward, they escorted the governors down the hall to the East Room, which had been arranged with few tables and chairs to encourage dancing to “September,” “Boogie Wonderland” and other hits from a musical group Obama listened to growing up.

The conga line formed after the media were escorted out and, apparently, after Obama had called it a night.

“Thank you also for waiting until I had left before you started the conga line,” the president told the governors the next morning. “I hear it was quite a spectacle.”

Some Obama guests say he immediately puts them at ease. He indulges them and serves cookies, too.

“People like me felt comfortable in his presence,” said Rep. Mike Honda, D-Calif., a self-described “poor country boy” who said he felt like a “freshman going to the senior prom” when he attended a White House reception for leaders of the congressional caucuses.

“Sometimes when you’re in the presence of the most powerful person in the world, in the most powerful democracy in the world … I was in awe that I was comfortable,” said Honda, chairman of the Asian Pacific American Caucus. “I think that’s his style and how he grew up, who he is.

“He’s down to earth and engaging,” Honda said.

Rep. Trent Franks, R-Ariz., was among those invited for the Super Bowl. He said Obama, an avid sports fan, joined his guests for most of the game between the Arizona Cardinals and Pittsburgh Steelers.

“It wasn’t a circumstance where he came in and said ‘Hi’ and then left,” Franks said. “He actually stayed and watched the game.”

Sen. Amy Klobuchar, D-Minn, said Obama was very cordial, and he and the first lady made guests feel comfortable. The president talked to everyone before the game started, she said, including a 12-year-old boy who asked Obama where the bathroom was.

“My favorite part was when he personally served us cookies — oatmeal raisin — when we were watching the game,” she said.

The gathering over hot dogs and hamburgers was one of several get-to-know-the-members-of Congress events Obama held as he lobbied lawmakers to support the nearly $800 billion tax-and-spend economic package he recently signed into law. His efforts produced no Republican votes in the House and just three in the Senate, but Franks said he still appreciated the Democratic president’s efforts to reach out to the opposing party.

“I think the value of social interaction like this is not so much that it co-opts anyone in any way. It certainly didn’t in my case,” said Franks, who said he had a substantive conversation with Obama at the party, “I think it humanizes and personalizes opponents. We can diminish politics and try to work together for what’s right for the country.”

Obama played the role of “first fan” at the Wonder tribute, where he opened up about his and his wife’s common enjoyment of Wonder’s music.

“As Stevie knows, I’m a huge fan. And he has been a great supporter,” Obama said before presenting the award-winning, singer-songwriter with the Gershwin Prize for Popular Song from the Library of Congress.

He said Wonder’s songs “became the soundtrack of my youth” and that in them he “found peace and inspiration, especially in difficult times.”

Obama presented the medal to Wonder, then wrapped the singer in a bear hug. As the media were led out of the room, Wonder struck up “Signed, Sealed, Delivered I’m Yours,” which was a staple of Obama’s campaign rallies.

God Bless,
The Truth Tracker
Jason R. Bootie