In FDIC We Trust

I noted yesterday that the FDIC is better run than most financially oriented government agencies in this mess, logistically, but I dropped a parenthetical that they were not financially prepared for this mess. No fault of their own, but the mess is bigger than their piggy bank and they need avenues for financial support. There are some and they will be needed. The piece I am linking discusses the FDIC in more detail along with some of the challenges that face them (along with some dirt on what their PR guy is saying versus reality). Well worth the read.

http://www.nakedcapitalism.com/2009/03/links-and-quick-takes-32109.html

And to add to the FDIC problems, the former parent of Washington Mutual is suing the FDIC for $13 billion. Apparently the parent did not like the deal the FDIC worked out with JP Morgan.

http://www.reuters.com/article/businessNews/idUSTRE52K1K620090321?feedType=RSS&feedName=businessNews

The FDIC has indeed had some very tough questions over the past few months. There was a fair amount of debate on the deal they worked out for Wachovia. There was some speculation that the FDIC worked the initial deal with Citigroup as a stealth way to prop up Citigroup. This was undone when Wells Fargo came in with bid for a better deal - supposedly so Wells Fargo could take advantage of certain tax benefits of the Wachovia losses.

The Question of the Day - Is This a Dead Cat Bounce?

Yes. I was tempted to leave it at that - a one word answer of yes, but people need reasons. Let's start with Geithner. What he is proposing on the public/private partnership is simply not about to work. Yves at Naked Capitalism explains it well, and it is not pretty.

http://www.nakedcapitalism.com/2009/03/investor-on-private-public-partnership.html

I will give more reasons tomorrow. Time for bed.

Disclosures: None.