Regional Banks Soar As Wall Street Burns

President Obama’s proposal to ban most proprietary trading wouldn’t affect regional banks, which are among the top performers on a tough day for stocks overall. Fifth Third (FITB) jumped 10%, KeyCorp (KEY) 7% and Comerica (CMA) 9.5%. All three banks reported losses, but their loan loss provisions were flat or lower, suggesting the crisis is easing for the nation’s regional and local banks.

That sent the entire sector higher. As of mid-afternoon, five regional bank groups were in the top 13 out of IBD’s 197 industries.

Everyone make sure you check out your regional banks ratings too the big banks are not the only ones having problems one of my banks a smaller one had a good rating just six months ago and it now has a D-

You can use this tool at the street to check out your bank.

http://www.thestreet.com/bank-safety/

and read more about the FDIC guarantee here

Regarding the FDIC guarantee being in the RED and expected to stay that way until 2012 there are some facts much of the public does not realize about the FDIC that you should know you can read about them HERE

I thought the FDIC has full faith and credit backing by the US treasury?

Actually, no, it does not. The language in Section 14 of the FDIC Act is clear and unambiguous (emphasis mine):
(a) BORROWING FROM TREASURY.— The Corporation is authorized to borrow from the Treasury, and the Secretary of the Treasury is authorized and directed to loan to the Corporation on such terms as may be fixed by the Corporation and the Secretary, such funds as in the judgment of the Board of Directors of the Corporation are from time to time required for insurance purposes, not exceeding in the aggregate $30,000,000,000 outstanding at any one time, subject to the approval of the Secretary of the Treasury: Provided, That the rate of interest to be charged in connection with any loan made pursuant to this subsection shall not be less than an amount determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable maturities.

Now that’s pretty interesting. First, that any additional money from the federal government is not a guarantee, but rather a loan, which will only be made subject to the approval of the Secretary of the Treasury. Further, that the loan is to be made at “current market yields.” What do you suppose would happen to US Treasury yields during a true emergency? I can imagine a few scenarios where they might skyrocket, and this would serve to compound the difficulty of keeping the FDIC fund solvent.

How long does the FDIC have to repay me if things go bad?
Here things get murky. We turn to Section 11 of the act and find this (emphasis mine):

(f) PAYMENT OF INSURED DEPOSITS.— (1) IN GENERAL.—In case of the liquidation of, or other closing or winding up of the affairs of, any insured depository institution, payment of the insured deposits in such institution shall be made by the Corporation as soon as possible, subject to the provisions of subsection (g), either by cash or by making available to each depositor a transferred deposit in a new insured depository institution in the same community or in another insured depository institution in an amount equal to the insured deposit of such depositor.

That only says “as soon as possible” and sets absolutely no time limit or maximum. Taken to the extreme, it might be impossible for the FDIC to ever make depositors whole again, and this is one of dozens of such “outs” that exist in the document. Remember, this act was written in 1933 when money was gold, times were uncertain, and government lawyers were exceedingly careful to avoid locking the government into any possible financial black holes.

And the FDIC Act is very clear to spell out that the only insurance funds available to depositors are those that exist within the fund itself:
(f)(1)(A) all payments made pursuant to this section on account of a closed Bank Insurance Fund member shall be made only from the Bank Insurance Fund

So, if the fund runs dry, there isn’t another possible source of funds that can be legally tapped without changing this wording. And that would take – wait for it – an act of Congress.

Surely Congress would appropriate the necessary funds to keep the FDIC solvent?

http://www.chrismartenson.com/martensonreport/how-safe-my-fdic-insured-bank-account

http://www.fdic.gov/regulations/laws/rules/1000-1600.html#1000sec.14

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