Monday, March 2, 2009

FDIC bonds another handout to the bankers

Last week, Dealbook at the Times, said that the banks were minting money selling debt.

Some of the debt issued by banks and the likes of General Electric was dependent on backing from the Federal Deposit Insurance Corporation, which set up a program in autumn to help banks issue such debt as investors fled the market. Because F.D.I.C.-backed debt involves a government subsidy, Wall Street is culling much smaller fees than usual for these types of deals.

Maxine Waters, when grilling the bankers on Capitol hill, was confused with the facts and looked daft, and accused the bankers of taking fees for accepting TARP money.

The banks took money from the TARP, and then sold FDIC backed debt.

JP Morgan sold $27.9 billion of FDIC backed JP Morgan debt.

Their fees on this piece was .30%, or $83 million in fees.

Morgan Stanley estimates that the banks will sell close to $700 billion of this FDIC debt.

Another $2 billion of fees.

It's more gravy for the bankers!

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