Saturday, October 24, 2009

We don't need to pay more people to ignore the problem

This is just asinine.
WASHINGTON, Oct 23 (Reuters) - The Obama administration plans to unveil on Monday a new plan for dealing with troubled financial giants, said a senior U.S. lawmaker, who also mentioned potentially big changes for the insurance industry.
No doubt, many people will be saying "about damn time." But that's missing the actual point.

Instead of enforcing existing laws, the plan is to come up with new laws. We aren't suffering from a shortage of laws (well, except in the repeal of Glass-Steagal), we're suffering from our government not enforcing the existing laws.



There are basically two types of loans -- those that are backed by the government (FDIC insured deposits) and those that aren't.

If you make a loan to a bank (by making a deposit or buying a CD) and the bank fails, the FDIC covers any loss you would have incurred by the bank not having the ability to repay your loan. (Yeah, up the FDIC insurance limits per deposit account per institution.)

If you make ANY OTHER LOAN at all, and the borrower can't repay, you loose the amount loaned (excepting whatever you can recover from any assets pledged as collateral for the loan).

That's it.

If the government were to actually enforce the law, then your tax dollars wouldn't be going to pay the large salaries and bonuses of companies that made stupid, NON-FDIC insured loans that went bad. Instead, your government decided to use you, me, my kids, your kids, and probably our grand kids to protect the financial giants that made hundreds of billions of dollars worth of stupid loans.

Oh, and the FDIC refuses to do its job of shutting down the banks that are STILL gambling capriciously with your deposits. Instead of banks being shut down before they become massively insolvent, the FDIC is waiting until they are dramatically underwater. That's a violation of the law.

Is this just a jobs plan for more people who will ignore the problems they are required by law to address?

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