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Is The FDIC Broke? How Could That Be?

IS THE FDIC BROKE? HOW COULD THAT BE?

All of the networks are "buzzing" today, saying that the FDIC is going to ask banks to pre-pay their FDIC Insurance Premiums for the next three years. This will bring in roughly $15 Billion for each year that is "pre-paid". Why are they taking such a drastic action? They say that they need to "shore up" their FDIC Fund, due to the large amount of bank failures this year, and they don't want to borrow from the Treasury, as this would appear to be yet another "bank bail-out" in the American Taxpayer's eyes. Click Here to read the MSNBC Article that just came out.

Where did all the money go, you may ask?

Loss Share Agreements! (Ok, not all of it, but A WHOLE BUNCH OF IT)

What is a Loss Share Agreement?

Click Here to read the blog I wrote just over 1 week ago to find out.

I actually got an email today from someone who wrote a blog on the same subject after reading my blog. She decided to take it down out of fear. She found out that the FDIC had visited it 30 times in 2 days, and she got nervous. I guess they're a little concerned about this kind of information getting out to the general public. Can't say I blame them. I'm not internet savvy enough to figure out how to determine who has visited my blogs, but maybe someone can tell me?

The case that my blog revolves around will be featured in a major business news publication at the end of this week. I can only hope that it raises the awareness of the American Public.

Finally, American Taxpayers are going to find out about the shady "sweetheart deals" that the FDIC has been cutting with the likes of none other than George Soros (you know, the MoveOn.org guy). Maybe our fearless leaders will now take notice of where all of this money is going (but I'm not holding my breath)!

Robert G. Hertzog

Phoenix Real Estate Consultant

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Posted by Robert G Hertzog on 09/28/2009 06:16 PM

Comments (72)

FDIC News in the Sales Strategies / Tactics Channel

fdic, loss share agreement, indymac, onewest bank, short sale, foreclosures

Originally posted at: THE HERTZOG BLOG: Is The FDIC Broke? How Could That Be?

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72 Comments on Is The FDIC Broke? How Could That Be?

SEP

Never in our lifetimes will we see as much government corruption and intimidation as is going on right now.

The media (formerly known as news media) let us down every minute of every day.

This could potentially be earth shattering. The government being in cahoots with someone likle George Soros. I'm sure it has nothing to do with the 90 plus banks that have gone under this year alone.

Who would have thought all this could happen just a few years ago? Does the FDIC really think that all these banks are going to come through with 3 years advance?

Bob: Now THATS A BLOG POST! Woohoo! Way to Go!

We are the networked generation. We KNOW what's happening and we SHARE the knowledge.

The message cannot be controlled, spun, or dummed down and hidden in the shadows...

Out the buggers !

Thank you for the information. I also read your blog and will research the others you mentioned. I was not aware of this and I'm sure I'm in the majority. When did this deal get made with the FDIC?

Donna Clement (Home Team of America) www.ClementHomeTeam.com

After reading your blog last week I did complain to the FDIC and this is the response they gave me.

Subject: Bank of America, National Association

Charlotte, North Carolina

Dear Mr. Cruz:

Thank you for contacting the FDIC Division of Supervision and Consumer Protection

The mission of the FDIC is to ensure the stability of, and public confidence in, the nation's banking system. The Division of Supervision and Consumer Protection (DSC) is responsible for enforcing federal consumer protection laws and regulations at various state-chartered banks. The Consumer Response Center is a part of DSC.

The FDIC insures the deposits of Bank of America, National Association. As a national bank, however, it is regulated by the Office of the Comptroller of the Currency (OCC). Since your complaint deals with the operation of the institution, rather than deposit insurance, you should contact that agency for assistance.

You can reach the OCC at the following address:

Office of the Comptroller of the Currency

Customer Assistance Unit

1301 McKinney, Suite 3450

Houston, Texas 77010

1-800-613-6743

Customer.assistance@occ.treas.gov <mailto:Customer.assistance@occ.treas.gov>

I hope this information is helpful.

Sincerely,

My complaint was over a short sale that we had 2 offer over value and the property still went to sale.

Hi Bob,

I just read this and your other post. And as I commented on your other one, all I can say is WOW! But at the same time, I'm really not shocked at all - considering everything going on in this world. Thank you again for your posts.

I am so glad you talked about this - we are living in scary times. I'm going to re-blog your post and share it on Facebook. Thanks for putting this out there.

The FDIC is a flawed and a no bite insurance plan. It is supposed to make us comfortable and secure with our banking institutions. By law they only have to have 10% of deposits in reserve. How long will it take to use that up when the crash of all crashes happens? And to answer Rob's question... who saw this coming?? The one's labeled chicken littles by our media. Ron Paul, Peter Shiff are just 2 names who were ostercized for their "way out" predictions which are now coming to fruition. This is why the Fed has not been audited as well. It would cause extreme panic in every one who is sold out to the almighty dollar... that's the majority.

The corruption of power goes very deep and if we knew the half of it, there would be a major panic that would totally devastate our economy. Eventually, there will not be enough fingers to cover the holes in the dikes and it will all come to a crashing halt. But that will be a good thing. Remember one thing... cash at the crash is king. Get out of debt... everyone! No debt equals no hooks in you... it is true freedom. There is no such thing as good debt when the dollar is severely depressed.

The good news is it's not too late to turn it around. It would take extreme discipline in turning off the cash faucets to so many programs that drain us... welfare, medicare/medicaid, Social Sec...etc. One step would be to eliminate frivolous lawsuits. Who wants to take on the trial lawyers? The speaker for the Democratic Party, Howard Dean went on record as saying nobody wants to do that.

Great post, I pray it goes far, you have my support. Blessings, Bob

Great post. I read your previous post outlining the sweet heart deal and I just can't believe it. I knew something was up but that is crazy.

This is a huge story. Is the whole system ready to collapse?

Bob, You can set up a tracking account at statcounter.com. There you can see which of your posts are visited, city and state or country of origin, and ISP source. Often government agencies or corporations have their own internal ISP that clearly states the origin. Statcounter is free, simple and informative. You'll have to install code in Settings. Choose the non-Java code or HTML code.

Yes, we're in difficult financial times ... which is an understatement!

The most recent "adjustments" to the budget showed the deficit growing by less. This was due to some of the bailout money AND the FDIC's increase in funds being put back into the general revenue fund. This effectively tied the FDIC's hands. The FDIC is not the problem. The Federal Reserve is......

The FDIC is somewhat transparent. The Federal Reserve is an enigma, purposefully so.

It is such a bigger issue than they are reporting. of the 8400+ Banks the FDIC is insuring there are only 400+ on its troubled bank watch list while there are as many as 2000 that are insolvent.

Slightly over half the voters voted for 'change' and now have little more than 'hope' left.

I would think that pre-payment of required premiums, or at least having a plan for payment makes good business sense and insures that the system is well funded. How can the FDIC expect to pay out a claim if there is nothing coming in? If a bank is insolvent and unable to pay premiums, should they remain in business? I think not.

Bob,

thanks for the post, it is a time of great concern, but as we get the word out the American people are resilent and we can work our way through this as we have tough times in the past.

Alarming. These "Loss Share Agreements" though are through FDIC, not Federal Reserve, right (Jeffrey)?

"Loss Share" agreements at first blush make some sense...help share the burden as banks work WITH homeowners to obtain the most satisfactory "workout" solution.

Except that it appears to have backfired, in that the banks seem to have decided that what with the way the incentives are structured, it is easier, more straightforward and the most satisfactory solution (for the investors anyway) to FORECLOSE.

Too bad that it speeds up the depression of our home values. Not to mention the effect on already distressed and now 'former' homeowners (especially in those cases where they tried to obtain a workout solution with their lender in good faith-and in way too many cases in vain).

Apparently that's acceptable collateral damage?

Bob, Thank you for your post. I've been a community banker for 22 years and am presently a commercial lender with a $1Billion community bank in Metro Atlanta that received no bailout money. We are very close to becoming a part of the "bad 30" banks in GA due to our having bet heavily on commercial and residential real estate in recent years, as did Georgian Bank, a $2Billion competitor which was shuttered by FDIC this past weekend. The major difference between our bank and theirs is (was) excessive reliance on brokered deposits (hot money) to fund explosive loan growth.

Back to the subject to requiring banks to pay 3 years of FDIC premiums in advance, my first thought was "Just when it seems the news can't get any worse, it does." Aside from the obvious corruption & cronyism and the issues you correctly cited in your previous (excellent) blog about short sales, FDIC's "insolvency" can be traced back to the "glory years" in which, for at least 3 consecutive years, many banks were allowed - at their insistence - to waive their FDIC premiums because times were so good, loan losses were almost non-existent, and the fund was believed therefore to be perpetually solvent. I find that to be a shining example that government does nothing well. Has your insurance company ever admitted, "Hey, we're immensely profitable. Just don't send us a premium this year."? Ain't gonna happen in the private sector, my friend. Actuaries & bean counters happen to be smarter than that.

As to FDICs now-reverse proposal of requiring already-beleagured banks to pay 3 years of premiums in advance, that's a "blood from a turnip" issue. My Jasper, GA- based employer (www.crescentbank.com), not to be confused with Crescent State Bank of Louisiana, posted a 2Q09 loss of $8MM, traceable mathematically to higher FDIC premiums and the necessity of substantially increasing Reserve for Loan Loss due to anticipated defaults.

Think I'm losing sleep about whether the Winter Olympics are held in Chicago? No, that ain't what keeps me up at night. Set aside all the game-playing & give out a shot of that "change we can believe in", Mr. Obama.

Definitely eye opening and not so surprising. The FDIC is only as good as the government that is backing it. What happens if the dollar collapses and foreign investors, like China, decide not to buy Treasuries? Our government would shut down, that is what would happen. America neeeds to get debt free at some point, so we will not be held hostage in the future by foreign investors.

Amazing isn't it. I'm about to write a post regarding the state of Arizona "losing" funds for the Your Way Home program. 8 buyer's were supposed to close between Friday of last week and yesterday, but each were informed Monday the funds were "lost." No one knew where the funds had gone!

Wow! I must say that I am pleasantly surprised by the feedback received not only on this blog post, but my previous one as well. This is a HUGE issue, and I hope that all of you spread the word as best you can. I think that Clark's perspective, as a current banker, speaks volumes to the issues we are facing. Don't stop by just reading this blog. SPREAD THE WORD! Write your elected officials, write the news stations, and most importantly, spread the word to your sphere of influence!

Bob,

You've got a really good series of blogs going here. I've enjoyed reading them and learning about this. I only hope that the mass media picks up on this and runs with it. This needs to be exposed.

This is what happens when you pit wonks against sophisticated financial minds, they will always find a way to tip the scales in their favor.

We talked about this at our weekly meeting this morning. Agents are getting pretty freaked out and talking about withdrawing their money from their banks. Pretty scary stuff...

Sounds like its time to put it all under the matress. OR invest it in real estate!! :)

Bob, This is really alarming. Should I take most of my money out of the bank and stuff it in my mattress and hope the house doesn't burn down?

The stupidity continues. Can you hide mattress money in a temperpedic?

Bob - Thanks for the informative post and congratulations on having this one "featured." For some time I have been critical of the path our elected "leaders" have chosen and the corruption that surrounds the process. Unlike one of the previous comments, I think we've already passed the point of no return. The corruption of both big business and government is far too pervasive for us to achieve correction, short of a dramatic and painful metamorphosis. And while I'm not ready to give up, I find the sheer magnitude of our nation's problems to be, at times, overwhelming.

When I saw this headline in the early morning, I just shook my head. The more information which is allowed for the general public to view and mull over, the more it confirms the true depth of the underlying dis-ease of our monetary system. Look out for falling dollars....and not the kind you are thinking of.....

Saw a video on the FDIC Inspector General interview with one of our representatives. The question asked was, "Do you know which banks got the 3 TRILLION dollars in bailout money". Although she hemmed and hawed. Her final answer, which she did not give, was We don't know which banks got the money. So much is going on so fast. We are way out of the loop.

Bob- thank you for posting this. I am amazed at how most of my friends just do not see how much trouble we are in. All of the recent articles in the news about the UN and several big countries wanting a different standard than the dollar should be making us all shake in our boots. We are monitizing our own debt as China is backing off from buying so much of it.

I used to be afraid we were going back to the Carter days. Now I think it will be much, much worse. The corruption in government is overwhelming.

Great Job, Bob! Keep word coming and keep the pressure on. Lets hope Big Brother IS watching, along with the millions of us who contributed to the funds the FDIC is GIVING AWAY. IF their efforts were helping the rank and file it might be acceptable to most, but it is only hellping the fat cats get fatter!

Eventually there will be a ground swell of activity that will end up throwing some of these crooks out of office and into jail, where they should have been all the time!

When I read your headline, I wasn't sure if you were asking if it was Broken or without Money. Perhaps I was correct on both accounts........

So, what will happend once the funds from the 3 yrs of pre-paid insurance fees have been used up as well? Will banks be required to pre-pay for 5 yrs? This has the makings of a classic pyramid scheme ...

Thanks for getting the word out on Active Rain. I have been suspect to them months ago and have been cautious moving ahead this year. Especially in the information that I give my clients regarding Mortgages and so forth. Sometimes I have felt as if I was the only one in the world trying to keep up with this massive amount of information coming out of various news sites. Frankly to size this up, I believe everyone that deals with the public in a fiduciary way should move ahead with thoughtful and total consideration of who, what and when. (Government is not Solid).

Again.. Good Luck with your Post getting attention and Great Posting here~

As long as the Federal Reserve can secretly give money to banks, the charade will continue. Where do you think the banks are going to come up with the extra money to pay the prepaid premiums. They can keep it going for a little bit longer to give their cronies enough time to siphon off as much as possible before it all collapses.

Please support HR1207, the bill that will allow the Federal Reserve to be audited. Until we know where the money is actually going, it's very difficult to fix anything. Nothing good in government comes when things are kept secret.

Also, remember when they UPPED the amount of coverage on deposits from $100,000 to $250,000 -- in December it goes BACK DOWN to $100,000 . . . many depositers don't know that!

FDIC $250,000 Insurance on Deposits (LIMITED TIME OFFER!!)

I am a bit more than perplexed at the outrage expressed towards the FDIC...Mrs. Baird's agency has generally performed exemplary over the past 24 months; why is anger directed towards them...the banks failed miserably, largely in part because of risky (but high profit loans) but individual investors were largely protected...exactly as is the charter of the FDIC....when will the knee jerk complaining about goverment end...you are late to the game, the government failed you from 2000-2008, but the check is coming due now...

I will check back and wanted to let you know I have learned more by reading your blogs...Thanks!

Hi Bob. I mentioned this in a reblog of your post that I'm really not at all surprised. Did people really think that change for the better would happen??? Great post. Thanks. ~ Lana

Good thing I barely have any money in the bank.... :)

You and me both Chuck!

It looks like Bailey's Savings & Loan all over again ! It's not even Dec. yet !!!!

Bob -

Thank you for this and your other extremely informative blog. Like you, I try to discuss and inform others to the blatant corruption going on in the banking industry in cohoots with our government. One would think others, whether in our industry or not, would be (a) interested and (b) outraged when provided with this documented information. The money given to these banksters is money we THE TAX PAYING AMERICAN PUBLIC must ultimately make good on. Plain and simple, the bailouts, the loan sharing agreements, the FDIC, the Federal Reserve ... is wealth being stolen from ALL OF US. More people are waking up ... due in large part to people like you that take the time to POST this well researched information. I feel your frustration and just want you to know you are not alone in your desire to educate a public that would much rather not be vigilant and responsible and just have "someone else take care of it". Thanks again, Diane

I've been thinking about the money-in-the-mattress thing for quite awhile, but I have a waterbed!

Jay Leno said it best last night when he was talking about Detroit's win over Washington. With editorial license, he said something like "isn't it ironic that Detroit owns Washington...no wait a minute, isn't it supposed to be the other way?"

Requiring the prepaids is going to cause the nearly insolvent banks to fail sooner causing the costs to go up for the ones that still remain. It's kinda like a dog chasing its own tail, then the banks will pass this cost along to the consumer.

Great info Bob. I just clicked over to your other post and need to spend some time reading through the FDIC agreement. Very interesting and scary stuff.

Okay I'm hooked. Time to go read the other post. Sounds like another case of the rich getting richer.

Hi, great blog. yes, I am very sorry to hear this. i know some people who make their living on fdic deposits. I sure hope it never goes under completely. Lots will suffer!

Great post!! Wonder how far we would get as brokers asking for three years of office fees up front? or as agents asking for three years of commissions up front?

Wow great post! I saw this news report today on MSN. It is amazing to see what all is happening. The banks are broke and now the people who insure banks are broke. Scary times we are living in!

Jason Myrtle Beach Golf

Interesting info, thanks for passing it along. I hope your friend is just being paranoid about the FDIC checking her out, maybe it's just other people interested in their nonsense.

The FDIC is not a true insurance program and because it has been politicized, the principle of moral hazard exists increasing the likelihood that bank failures will occur.

The FDIC never has enough in liquid cash to insure everyone's deposits. Like the The Federal Reserve, it is all phantom numbers.

It's all a game.

I wonder why I want to have kids one day.....would it be fair to them?

Somebody always gets rich at the expense of taxpayers why should we be surprised.

Thank you for keeping us informed. It is sad that folks are losing their homes due to greedy banks and individuals.

It seems like everyday we are reading headlines about something really scary like this. Thank you for the information. I look forward to reading your other blogs.

I know there is corruption, greed, mistakes being made everywhere in this industry. I do not begin to think I understand what is going on, but I think it all be over.

SEP

OK.. now what is wrong with this picture... Are you serious ? Well I'm sure you are. Congratulations on the feeatured post. Time to get the word out there.

I actually think the opposite of Phil's opinion. I think we've just seen the tip of the iceberg. Bend over and hang on to your boot straps cause it's gonna be a rough ride ahead for along time to come. Sadly we'll need the second coming to alter the course of corruption in our society.

Bob -

Thanks for airing this. It is becoming more and more clear that a lot of banks conduct operations in a manner so sleazy they make purse snatchers look like model citizens.

Like jacking up the interest rate on hundred of thousands (perhaps millions) of credit cardholders who have never defaulted on their payments.

That there is hanky-panky going on amidst the activities of the FDIC should not be surprising anymore.

Banks or our lawmakers. Who is more corrupt?

Let's hope everyone still has enough energy to be outraged during the next election. Or maybe we should just hope that will BE a next election.

It's amazing : So many people voted for " change " and that's exactly what they are getting ! Only NOT for the better ! I remember after my great grandmother died. We went to clean out her house. After about a half hour we realized we had to search every nook and crannie of her home. She had canned goods hidden beneath the bed. Jewelry hemmed in the bottom of curtains, money hidden in coffee and sugar canisters and the list could go on. The depression stayed with her well into the days when it ended and America was on track but she always remembered and always said " history always, always repeats itself." She was a wise woman not crazy like some thought :) :)

So much has and is happening in our government. Every day I read another news report there is one more " nail " driven into the coffin of America. This is NOT change, this is a government take over at it's best. Just last night the feds were informed of a poll listed on Facebook " Should Obama be killed ". Nervy of someone to post but in less than just a few hours before the feds had Facebook remove it over 700 people voted and not so well I might ad, or not what Obama would want to hear.

We, the little people are at war in less than 12 months of Obama's presidency. We are at war with our very government and I am sure that makes us the weakest link in country's that are waiting , have been waiting to try and show us who is boss. Scary...all the way around, in every case !

A Quick Update... I just received word from Business Week Magazine, and they ARE going to run this story after all. The reporter said that he is not allowed to discuss publication dates, but he promised to send me an electronic copy as soon as it is finished. Once I receive it, I'll be sure to post a new blog so that all of you can take a look! I hope that some of the major news outlets pick up on it once it hits the magazine!

Thanks again for all of your comments and feedback!

Bob

Based on another post, it sounds like there are other issues that make the loss share agreements even more of an issue than I would have expected in this whole mess.

OCT

The goal of the FDIC is to get liquid, and this was apparent last year. Isn't it interesting that they temporarily raised the insurance for deposit from 100K to 250K. I believe this is where part of the problem began.

Also, on this note, what will out country do when the unemployment benefits run out,or they go bankrupt as well?

Nice post and totally appreciate all of the intelligent comments!

OCT

I reblogged your other post and sent the link out to some people. This is sick.

Robert - There was an article about this in the local newspaper a few days ago. I think the word is getting out.

Hi Troy,

Please post a link to the article you are referring to. I'd love to read it.

Thanks,

Bob

OCT

Bob - Well you got the featured post, Congrats! This is such an important and timely subject it is imperative that information like this is shared and debated. The more information that is out in the public the better chance of something actually changing. Thanks for bringing this to the forefront.

OCT

Danger Will Robinson! Danger! Danger!

OCT

AS my HS World History teacher was fond of saying (paraphrase): "Pay attention to our history & the world for: The more things change, the more they stay the same. History isn't a straight line but is spiral and always repeats as people forget the lessons of the past."

So much for Obama's pledge of transparency & changing Washington's business atmosphere.

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