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NEW YORK (Reuters) - Dozens of U.S. banks will fail in the next two years as losses from soured loans mount and regulators crack down on lenders that take too much risk, especially in real estate and construction, an analyst said.
I did hear a report on NPR today that builders who have too much debt and too much excess land could go under. It was a writer for the magazine Big Builder who estimated that 1 in 3 of the top 100 builders would go under.
The banks are backed by the Federal Government. They cannot fail.
Sure they can, it's a business and businesses can (and do) go under.
The FDIC monitors the banks it insures. If trouble arises, such as the risky business climate that exists now, the FDIC can take action when a bank has too many liabilities. The FDIC helps to find a way to pay out the deposits, merge it with another bank or replaces the board of directors and provides funding to bridge the gap.
The banks are backed by the Federal Government. They cannot fail.
Actually banks can and do fail. What is backed is the deposits, meaning that when a bank owes more money to the depositors in its bank, its insolvent. Yes, the federal government makes the deposits good, but they take over managing the bank, liquidating the assets, and the depositors lose their interest.
Actually banks can and do fail. What is backed is the deposits, meaning that when a bank owes more money to the depositors in its bank, its insolvent. Yes, the federal government makes the deposits good, but they take over managing the bank, liquidating the assets, and the depositors lose their interest.
A few have predicted Fannie and Freddie going BK.
While bailouts can be implemented with these institutions, it would seal the coffin on issuing mortgages in this country at anything less than 15% for a long long time, since its this backing that makes their paper more valuable than non-conforming loans.
So we have come full circle since the S&L crisis in the late 1980s/early 1990s, and in between virtually the same sort of corruption and incompetence in Japan.
While bailouts can be implemented with these institutions, it would seal the coffin on issuing mortgages in this country at anything less than 15% for a long long time, since its this backing that makes their paper more valuable than non-conforming loans.
Yeah but Fannie and Freddie cant go backrupt because they have the ability, under force of law, to modify their fees and to increase the Mortgage insurance rates on everyone else.
They are also backed by federal guarantees, which is how they get investors to buy into them, so if they go under, the country is in huge trouble.
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