Risk Rap

Rapping About a World at Risk

The Cost of Banking Goes Up

screamThe severity of the banking crisis is evident in the 95 banks the FDIC has closed during 2009. The inordinate amount of bank failures has placed a significant strain on the FDIC insurance fund. The FDIC insurance fund protects bank customers from losing their deposits when the FDIC closes an insolvent bank.

The depletion of the FDIC Insurance fund is accelerating at an alarming rate. At the close of the first quarter, the FDIC bank rescue fund had a balance of $13 billion. Since that time three major bank failures, BankUnited Financial Corp, Colonial BancGroup and Guaranty Financial Group depleted the fund by almost $11 billion. In addition to these three large failures over 50 banks have been closed during the past six months. Total assets in the fund are at its lowest level since the close of the S&L Crisis in 1992. Bank analysts research suggests that FDIC may require $100 billion from the insurance fund to cover the expense of an additional 150 to 200 bank failures they estimate will occur through 2013. This will require massive capital infusions into the FDIC insurance fund. The FDIC’s goal of maintaining confidence in functioning credit markets and a sound banking system may yet face its sternest test.

FDIC Chairwoman Sheila Bair is considering a number of options to recapitalize the fund. The US Treasury has a $100 billion line of credit available to the fund. Ms. Bair is also considering a special assessment on bank capital and may ask banks to prepay FDIC premiums through 2012. The prepay option would raise about $45 billion. The FDIC is also exploring capital infusions from foreign banking institutions, Sovereign Wealth Funds and traditional private equity channels.

Requiring banks to prepay its FDIC insurance premiums will drain economic capital from the industry. The removal of $45 billion dollars may not seem like a large amount but it is a considerable amount of capital that banks will need to withdraw from the credit markets with the prepay option. Think of the impact a targeted lending program of $45 billion to SME’s could achieve to incubate and restore economic growth. Sum2 advocates the establishment of an SME Development Bank to encourage capital formation for SMEs to achieve economic growth.

Adding stress to the industry, banks remain obligated to repay TARP funds they received when the program was enacted last year. To date only a fraction of TARP funds have been repaid. Banks also remain under enormous pressure to curtail overdraft, late payment fees and reduce usurious credit card interest rates. All these factors will place added pressures on banks financial performance. Though historic low interest rates and cost of capital will help to buttress bank profitability, high write offs for bad debt, lower fee income and decreased loan origination will test the patience of bank shareholders. Management will surely respond with a new pallet of transaction and penalty fees to maintain a positive P&L statement. Its like a double taxation for citizens. Consumers saddled with additional tax liabilities to maintain a solvent banking system will also face higher fees  charged y their banks so they can repay the loans extended by the US Treasury to assure a well functioning financial system for the benefit of the republic’s citizenry.

You Tube Music Video: The 5th Dimension, Up Up and Away

Risk: bank failures, regulatory, profitability, political, recession, economic recovery, SME

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September 30, 2009 Posted by | banking, business, commerce, economics, government, Hamilton Plan, private equity, regulatory, SME, sovereign wealth funds, TARP, Treasury | , , , , , , , , , , , , , , , , , , , | 2 Comments

Il Duce’s Ghost

duceIl Duce’s ghost is restless. Summoned by the phantasmagorical fear of a people suffering from the multiple illnesses of a very sick nation, Il Duce’s ghost stalks the land. Raised from the grave by the craven babble of Talk Radio shills, pernicious corporate interests and a ruthless ruling oligarchy aided and abetted by complicit politicians bought on the cheap to act as their bagmen, Il Duce’s corpse twitters back to life.

As we count down to Harold Camping’s rapture date of 5/21/11, the frenetic fear of a collapsing world increasingly terrifies the masses. Religious fundamentalists of all stripes cry that modernity’s embrace of science and a culture of relativism is an abomination to the sight of God. The “Children of God” pine away about the erosion of the old values of the Old Time Religions; while the “Children of Enlightenment” fear that reason is quickly disappearing into a broken Hadron supercollider’s black hole of ignorance. One side is busy arming themselves in preparation for the coming battle of Armageddon while the other side lays up assets in their bank accounts to ride out the coming Day of Judgment. Il Duce is truly one of God’s favored. Anointed by fundamentalist TV preachers, he honors their creed and receives funding by Bible thumping wealth gospel believing businessmen because he promises to protects their God given fatted coffers. Only Il Duce can bring both sides together to sing praises in a divinely inspired choir.

The Federal Treasury paid a rich ransom to bankers to free our imaginations from the dread of the collapse of free market capitalism. Lately we hear murmurs that the nuke button still remains painfully close to the twitching fingers of fidgeting bankers. They threaten to shut down our tired and poor ATM networks and revoke our credit limits yearning for more debt. A strong dose of TARP II is the only known medicinal cure. Frenzied Tea Baggers scream their anger at a government intent on taxing the life blood out of its citizens so fat cat bankers can cash stupid money bonus checks. This insures that the syncopated beats of our capitalist heart continues to rock on. Il Duce is a skilled and gifted physician. He knows how to conduct the delicate procedures necessary to prevent coronary arrest. Il Duce alone knows the recipe to concoct a special brew of herbal teas. Its a powerful elixir that alleviates the caffeine induced head aches of Tea Bagger’s while keeping the circulation of our cholesterol challenged free markets flowing.

At town meetings, people in junk food fueled schizophrenic rants rave at impotent senators going through the motions of participatory democracy. The constituents insistent diatribes profess a love of country while they eagerly profane and condemn its democratic institutions. They say they are concerned about all the money being spent by the Feds. As deficit spending spirals into the trillions they shout “Who will pay for this?” and “Its unconscionable to saddle my kids and my grandchildren with this burden.” Perhaps. But we should also ask what are we doing to increase peace in a world rife with conflicts. Its just as unfair to ask our grandchildren to fight wars for which they had no grievance. Its also equally unjust to ask them to breathe air we polluted with chemicals or to drink water we spat in. I believe it is just to ask them to pay for our country’s infrastructure that all future generations will benefit from. They’ll need roads, water, hospitals and schools. I still cross bridges and traverse high ways and attend schools that were built by earlier generations. I drink water from aquifers and water systems that were built 100 years ago. New Yorkers ride in subways that were built by our great great grand parents.

Birthers are eager to de-legitimize the institutions of a democratic republic. They scream at congressmen that their actions are UnAmerican. They advise their representatives that they should read the constitution. Undoubtedly the culture of corruption consuming our politicians is a systemic disease badly in need of eradication. But emotional outbursts of Birthers shouting down representatives as they wave facsimiles of birth certificates, crying out “I want my country back” weakens the legitimacy of our government. The vehemence seems driven more by the fear of a person of color as president and the cultural transformation radically altering the ethnic landscape of America. Il Duce understands this anguish. It grieves him to see real Americans in such pain. He knows an ethnicity other then his own is unworthy to hold supreme office. The image of Il Duce is a venerated prism that must reflect the complexion of true Americans.

Federalism is not based on a two party system. It is based on a constitution complete with a Bill of Rights. It includes three independent branches of government that serve to check and balance the power of each branch. It is a system in dire need of reform but it has through our country’s history demonstrated its resilience and value as the best model to assure the semblance of a participatory democracy. It is the worthy expression of a free democratic peoples and it is certainly worthy of preservation. Federalism is not the problem. The problem lies in a compromised political process that elects entrapped representatives to office. Il Duce prefers obfuscation. Tyrants need to hold all the cards of power to smooth over the messy and uncomfortable edges of democratic republics. Its better and more expedient for a benevolent philosopher King to make the hard decisions that need to made.

The wisdom of Il Duce would be immediately put to use to make the hard choices to solve the health care problem vexing our country. The debate has stoked the howling yodelers of Talk Radio to turn up the volume of their vitriol. They have energized a nation of Valium saturated minds. They have woken millions from the torpor of ambivalence induced by the pharmaceutical industrial complex. This industry suspected of playing a role in the pharmacide of such cultural icons like Elvis Presley and Michael Jackson buys spots that run in continuous loop on the grim reality TV shows. The ads hammer home the lesson that instant relief from the nausea of daily life is just a shot away. Mothers little helper dispensed en masse is as close and quick as the drive-in window at Walmart.  All for a small deductible of $5.00.

There is something in the water. America’s rivers are polluted with bio active elements people discharge from their bodies due to the use of products from the pharmaceutical industrial complex. It pollutes our aquifers. Il Duce takes a long cool drink, as he marvels at the wonder of our industry and invites more to freely imbibe.

The twittering nonsense and bold Facebook lies Sarahcuda’s minions are willing to swallow so as not to be out of goose stepping rhythm with other Dittoheads clearly comforts Il Duce. The Confederacy is rising again. This confederacy transcends the easy boundaries of geographic definition. This confederacy consists of state militiamen, libertarians and ad hoc communities springing up and thriving along the fracture lines of the urban and rural divide. They are seeking an ideology that is palatable enough to coexist with armed militias, Tea Baggers, Christian Falangists, nationalists and other malcontents. Throw in an assortment of skinheads, Nazis, White Supremacists and other national socialists and you have the semblance of a profile of the new confederacy for a new millennium. They worship force and the right of the stronger, believing that militarism is the supreme arbiter of all things. They are eager to project that power.

Il Duce’s ghost is awake and walking across the land like Goya’s Colossus. Summoned by the sycophants of right wing Talk Radio, encouraged by the Bush administrations use of the constitution as toilet paper, risen by the growing militarism and nationalist sentiment and fed by the militant anger of a people that can no longer suffer the abuse of power by the ruling oligarchs, Il Duce’s ghost has awakened, complete with freshly pressed Blackshirt.   It is ever listening, waiting for the right moment to fully materialize amidst the savagery of a savage nation.

You Tube Video: Benito Mussolini

Risk: fascism, Federalism, democracy

August 17, 2009 Posted by | Uncategorized | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 6 Comments