Word: banking
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...nation's biggest banks, the U.S. Treasury is providing capital infusions and now a detailed stress test. Also, Citigroup announced on Friday the outline of a deal with Treasury to convert the government's holding of Citi preferred stock into common shares. The U.S. Treasury could end up owning more than 36% of the ailing bank. But confidence in the financial community remains low. Describing a vicious cycle of risk aversion, former Fed chief and current Obama adviser Paul Volcker told Congress's joint economic committee on Thursday that "an insecure bank faced with what it sees as insecure borrowers...
...front, however, the government's actions are paying off. Total deposits in the nation's banks increased in the fourth quarter by $307.9 billion as Americans poured their money into the safety of insured bank accounts. Now the question is, When will banks start to lend...
...During the savings and loan crisis in the late 1980s and early 1990s, 747 banks and S&Ls failed. Taxpayers pay to protect bank customers' money, as is true with any bank failure involving FDIC-insured deposits. A taxpayer with $100,000 of insured cash in his local bank might get lucky. If the firm goes under and his deposits are saved by the FDIC, his years of paying taxes will come back to him with a profit...
...Last year, the omnipresent economist, Nouriel Roubini, told Barron's that 1,400 banks would fail during the current economic crisis. Investment bank RBC Capital puts the figure at 1,000. Since there is no way to know how large the deposits at any of these institutions are, the amount of exposure the FDIC faces is impossible to forecast. But, it will be more than the $22 billion prediction. If 500 banks fail, which are fewer than those that failed in the S&L crisis, the figure is probably ten times that...
...Perhaps the main reason that people lose faith in their governments is that they believe the people in charge are either incompetent or dishonest. The average person must wonder whether anyone is in charge when the forecasts of bank failure rates are unbelievably low at the same time that the Administration is debating whether it may have to nationalize Citigroup (C) or Bank of America...