Community banks rely more on deposit funding, so they suffer a “much heavier burden” as a result of deposit insurance proportionate to size than peers such as New York-based Citigroup Inc. and Wells Fargo & Co., with its headquarters in San Francisco, Fine said.
Community lenders “are feeling like they are paying for the incompetence and greed of Wall Street,” Fine said this week in an interview.
FDIC assessments are set per $100 in deposits and not weighted by bank size. That’s a formula that could be modified to shift the cost burden to the largest banks “that caused this train wreck,” Fine said. TCF never “securitized anything, we never engaged in any of those unscrupulous activities,” said Cooper, 65.
I am not very surprised that politicians provide big favors to those that give them huge amounts of money (former investment banks, farming interests, private plane owners, Fortune 100 companies, owners of oceanfront mansions, private equity speculators…). I am a bit surprised how much money is being lavished on those huge donors now, with the bailouts. Especially with how lacking in even minor consequences those huge gifts to their donors are (normally if the payoffs to supports get too huge there are at least some cover provided by putting in consequences for this “need” to send taxpayer money to their contributors).
The FDIC is a great government program. But allowing huge banks to take enormous risks and then passing on the much of the costs, of a small portion of those risks (FDIC insured deposit accounts), to banks that do not act as irresponsibly as the risk takers is a bad idea. Insurance should have increasing costs based on increasingly risky behavior.
These wonderfully large donors (Citigroup, Morgan Stanley, Goldman Sachs, Bank of America…) setup corporate fronts to avoid paying taxes on the profits. Yet when their risky behavior bankrupts them (of course anyone that would be bankrupt can avoid it with tens of billions of dollars from the government) and greatly harms the economy they feel perfectly justified calling up the friends they gave a few tens of millions to and ask for hundreds of billions from taxpayers. I must say they certainly know how to take as much as they can from society while giving as little as possible back. I don’t think many others would have thought they could pay politicians a few ten millions to allow themselves to pay themselves tens of billions in bonuses on fake profits using insane financial gimmicks (that never should have been allowed – see Canada’s banking system for one example of how not to allow huge political donors to ruin the economy). Then create economic havoc and be rewarded with hundreds of billions of dollars from the taxpayers.
See my post from 2005 on the problems massively excessive pay will result in: “The excesses are so great now they will either force companies to take huge risks to justify such pay and then go bankrupt…”