You’d think an institution called The Federal Deposit Insurance Corporation would be inherently incapable of creating emotive outbursts amongst analysts and members of the media.
But you’d be wrong.
If you can’t get your collective minds at Bloomberg News around the nuances of federal finance and the workings of the FDIC, THEN STOP WRITING ABOU IT. Either you and your editors just don’t get it or Bloomberg is intentionally trying to whip up public fear regarding the FDIC to sell media. Either way, I am going to start doing the Mexican hat dance on anyone at Bloomberg who touches this story until you boys & girls get in right. Juan, please begin the music …
That’s from Chris Whalen, of Institutional Risk Analytics fame. The quote is an extract from an email sent on Thursday to Bloomberg columnist Jonathan Weil and a fellow B’berger David Evans, complaining about the news agency’s coverage of the FDIC. Whalen copied the mail to other media and to various regulators.
Bloomberg has a history with the FDIC. In November 2008, Evans published a piece headlined Banks on the Edge, suggesting taxpayers would have to fund a government bailout of the FDIC, which was supposedly set to run out of money as a long line of US banks collapsed.
The FDIC took exception to that, publishing an open letter from its director for Public Affairs, Andrew Gray, to Bloomberg, setting out “the real facts” and insisting the “insurance fund (was) in a strong financial position to weather a significant upsurge in bank failures...”
Ten months on, with chairwoman Sheila Bair trying to work out how to replenish the fund’s dwindling coffers, Bloomberg’s Weil has now renewed the attack:
The FDIC’s insurance fund is going broke, and Sheila Bair is wondering aloud about how to replenish it. This means one thing for taxpayers: Watch your wallets.
Across about 1,000 words of aggressive prose, Weil’s column on Thursday dismissed the FDIC as an incompetent lot, saying the country deserves an explanation as to how the agency messed up so badly:
The FDIC has been mismanaged, and its credibility as a regulator is in tatters. Its insurance fund wouldn’t be in this position today if the agency had been run well.
(Etc.)
Cue the outburst quoted above from IRA’s Whalen, who is furious that Bloomberg has not acknowledged the fact that the FDIC cannot actually run out of cash – having access to loans from the US Treasury, the Fed and even the banks it insures.
It’s all very un-becoming. But this little spat feels as if it has further to run…
Related links:
FDIC and the magical accountant: a financial fairytale – FT Alphaville
The FDIC is not bust, ok? – FT Alphaville
FDIC, the ‘F’ stands for… – FT Alphaville
FDIC insurance, inspected – FT Alphaville