This morning on the Opie and Anthony show, Aussie comedian Jim Jeffries was a guest, and he told an amusing story. It seems that he and some fellow comedians were travelling from Perth to Kalgoorlie for some sort comic event. Things went well for a bit, until, about three hours outside of Perth, they ran into an emu. The poor emu didn’t die immediately, and, tragically, had to be dispatched with a large rock. Their car, however, did die, due to radiator damage.
They were stuck in the Australian desert with no transportation. Fortunately, in Australia, they do keep cell towers along the major roads, so Jeff and the boys were able to call a fellow they knew back in Perth, to ask if he could come help them out, and if he did, they’d try to see if they could get him some mike time at the comedy show.
He agreed, and told them he’d be on his way in about an hour.
So, four hours later, Jeff saw his car, coming down the road a couple of miles away. He also saw, anbling slowly towards the road, a large Red Kangaroo. As he watched, the car get closer, he also watched the kangaroo come closer and closer to the road. And in what must have been sort of a horrified fascination, he watched the convergence until BOOM! The car and kangaroo collided.
Fortunately for them, their friend’s car was still driveable after the accident, although the ‘roo was a total write off.
But, the story really encapsulated the way I’ve been feeling watching the economy over the last several months. You can see the elements coming together for some sort of horrible wreck, but there’s not really anything you can do to stop it.
And it looks like the kangaroo is coming closer.
Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department…
Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding…
The FDIC would be able to borrow as much as $500 billion until the end of 2010 if the FDIC, Fed, Treasury secretary and White House agree such money is warranted. The bill would allow it to borrow $100 billion absent that approval. Currently, its line of credit with the Treasury is $30 billion.
Let’s examine the implications of this. TheFDIC fund is now depleted, and needs to be recharged. Not with $30 billion, but with $500 billion. Banks howled at premiums being increased, saying it could damage their business even further. So now Sec. Geithner, Chmn. Bernanke, and Chmn. Bair are asking for the federal government to open their credit line, which is currently restricted to $30 billion.
Does this mean that the SecTreas, FDIC, and Federal Reserve all believe the FDIC may need to come up with half a trillion dollars to pay back depositors for bank failures? If so, that’s…disturbing.
What do they know about the health of banks that we do not in order to come up with that number? What will the general public do if they figure out the implications of this? How will the markets respond?
Hop. Hop. Hop.