Fdic Restructure Loss: Fill & Download for Free

We would have been better off within 5 years.If all of the biggest banks had gone bankrupt, it's not like someone would have gone block to block torching bank buildings. All of the physical assets would remain. And's not like your or my savings would disappear - that's insured by the FDIC, and many of the failed institutions were not retail banks anyway. The primary losers would be financial institutions and shareholders. It's important to realize that many retail banks were never in danger.So what would happen after many big banks went bankrupt? Big investors would swoop in to buy their assets cheaply. There are literally trillions of dollars of cash that can be leveraged, from Warren Buffett to the multi-hundred billion dollar cash reserves held by big tech companies to the trillions held in foreign sovereign wealth funds. There would likely be a brief period of a few months where financial liquidity for businesses is poor. Businesses like auto making that depend heavily on finance would be disrupted. But again, nobody is going to burn the plants down. A year later, and probably much sooner, the productive assets will be producing again. Some unproductive zombie businesses that were being propped up by “good money after bad” finance would fail, but that's a good thing.Letting the big banks go bust has two big benefits. First, it causes the firing of the incompetent management that let this happen. The idea that nobody saw this coming is nonsense: talk of a bubble was everywhere, and everyone in finance knew they were making "heads I win, tails you lose" bets. Second, forcing the banks out of business ensures that future banks and finance-dependant companies are far more cautious, because any bank or company that is not cautious will be punished by loss-fearing shareholders. It would also promote the development of small banks and financial technology firms, while that development is stunted today by the extra advantages given to “too big to fail” banks. Today, it's a dangerous bet to bank with any bank that isn't too big to fail.The government has done absolutely nothing to address the “too big to fail” problem. We are set up to repeat the 2009 crash at an even larger scale. That is bad.Edit: To clarify an issue raised in comments, I am not advocating a complete liquidation bankruptcy but rather a restructuring (Chapter 11). Wipe out the shareholders, bond holders take a write-down and managers get fired, but keep the low level employees and physical assets. This allows the bank to mostly continue functioning but avoids the bad incentives and rewards for bad behaviour of the actual bailout as implemented. Restructuring is the standard bankruptcy for a business that is fundamentally sound but has some bad debts it can't pay.Also, if you're going to assert that my proposal would have led to a worse recession than already happened, please provide evidence.

I have no problem identifying and decrying the drawbacks of the way the bailouts happened and did not happen, but I'm hard pressed to think of a method that would have been identifiably superior prospectively. Should Treasury founded dozens of new banks with the $700 billion? Could the FDIC have been able to pay off the insured losses in the largest banks? If not, what would have happened? Would we have offered real, enforced debt restructuring for housing?

On August 10, 2017, the Centre proposed a new bill – The Financial and Deposit Insurance Bill, 2017. The aim of the bill is to provide a comprehensive resolution framework to deal with bankruptcy situations for financial sector entities like banks and insurance companies.With the introduction of this new bill, the primary question that arises is how safe are our savings in our bank accounts?The irony here is that while banks are meant to keep your money safe and allow you to withdraw the same when you wish so, can you envisage a situation where the bank goes bust and is unable to repay the deposits it holds?The financial distress of banks is not something new and has been addressed by the Deposit Insurance and Credit Guarantee Corporation Act since 1961. As per the current legal regime, banks take an insurance cover for deposits of up to Rs one lakh, including interest. Any deposit over and above Rs one lakh does not have this protection.Quite glaringly, this implies that, theoretically, there is a possibility that a bank account holder with a large deposit might lose a lot of money if the bank goes insolvent. Interestingly though, this has never happened since 1961. The problem with the new bill is that it has paved the way for liquidation or amalgamation of public sector banks.Impact of the new bill on the banking industryThe banking sector is of the opinion that this new law will take away power from the Reserve Bank of India. As per the new bill, a Resolution Corporation will be set up which will oversee all matters pertaining to the restructuring of financial institutions.This body will weaken the regulatory role of RBI. This corporation will solely determine if ‘financial banks’ are exposed to any sort of financial problems and will also trigger the appropriate remedy to rescue the banks from such a situation. Further, this body will also take over the Deposit Insurance and Credit Guarantee Corporation and will provide deposit insurance. It will also decide the amount insured for each depositor. It is also possible that this insured amount can vary for customers across different banks and it may also vary from different categories of customers within the same bank.Previously, the State Bank of India Act has made it clear that the banks cannot be liquidated. However, this new law will dilute this provision. Further, another point of debate is that the Resolution Corporation can fire employees of the bank and can also change their compensation structure.What Causes Bank FailuresBanks go under when they are no longer able to meet their obligations. The bank might lose too much on investments, or the bank may be unable to provide cash when depositors demand it (see below).Ultimately failures happen because banks don't just keep your money in vaults. When you walk in and deposit cash (or deposit funds electronically), the bank invests that money. A simple form of investment is making loans to other bank customers so they can earn interest — and pay you interest on your deposits.Banks also invest in much more complicated ways. If the bank takes large losses in any one area, it risks failing.What Happens in a Bank Failure?Most US banks are FDIC insured. If you are not banking at an FDIC insured institution, you're taking a huge risk. When these banks fail, the FDIC takes over. They may sell the bank to another (stronger) bank, or they may operate the bank for some time as a federally owned bank.The FDIC insures deposits up to $250,000, so keeping more than that at any bank may put your money at risk. However, it is possible to have more than $250,000 insured at one bank if several people or entities have an interest in the money. For example, retirement accounts and savings accounts for different family members can increase your protection. Take the time to understand FDIC limits if you have more than $2500,000 at the bank.Customer ExperienceFor many customers, a bank failure is a non-event. Customers continue to use the checks, debit cards, and electronic transfer instructions that they used before the bank failure. At some point, customers may eventually get new checks and cards.​TimeframesThe FDIC does not publish a specific timeframe for resolving bank failures. They note that historically they have made funds available within one business day. They try to close banks down on Fridays and get back to "business as usual" by Monday morning.However, circumstances with a given bank failure or with your accounts can slow the process down. The FDIC's first choice is to create a new bank for seamless operations until your account is sold to another bank. In some cases, this option is not available and they cut you a check for your insured deposits.Bank Runs and Bank FailuresAfter a bank failure is announced, there is little reason to make a run on the bank if your assets are insured. If the FDIC has already taken over, your money is no longer held by the weak and failing bank. If you want to get your money out and use a different bank, you can write a check or transfer your money electronically to the new bank.If the FDIC has not found a successor bank, you will not have access to your money and you'll have to wait for a check from the FDIC. In either case, there's nothing you can do after a bank failure is announced to affect how much money — if any — you'll lose.Uninsured DepositsIf you have uninsured deposits at an FDIC insured institution, you may have a problem. The FDIC typically makes insured deposits available immediately after a bank failure. Uninsured deposits may not be available for years. The FDIC has to sell the institution and its assets and see how much money (if any) is left to distribute to creditors.Destroyed BanksSometimes bank branches are destroyed as a result of natural disaster or terrorism. Physical destruction is different from a bank failure. Again, if your accounts are insured the event is most likely just an inconvenience — not something that will completely ruin you.​Avoiding Bank FailuresIt is difficult to know which banks will fail. The FDIC does not announce bank takeovers ahead of time. The best course of action is to make sure that you’re observing FDIC limits and not taking any risks.Some bank rating services may help you avoid bank failures. These services look at banks strength, business models, and exposure to various risks. However, some bank failures come out of nowhere and cannot be predicted by outsiders.Please do Upvote & Share if you like !!!!Also Follow me for more such answers.