Wednesday, December 05, 2007

Too big to fail? Not this ship, sister

First, spam e-mail of the day. "Open jars in seconds!" is the message header. Now that's a product I need, because I've always thought it was taking too damn long to open jars. I mean, I opened a jar of olives the other day and it took me at least... well... seconds to open. Unacceptable! Aaaaaaanyway...

The concept of "too big to fail" has been bandied about quite a bit lately. For most people, the idea stems back to Continental Illinois, which was at one time the 7th largest U.S. bank, and was bailed out by the Federal Government in 1984. One might argue that the Chrysler bailout in 1979 was a similar theory, albeit for different reasons.

Does the too big to fail concept still hold today? I think it depends on what you mean. For the sake of discussion, let's frame the question this way: would the Federal government conduct a full scale bailout, either by taking an equity position (as in Continental) or by guaranteeing debt (as in Chrysler) of any financial institutions should they fail due to mortgage-related losses?

Before I move on, please note what we're talking about a direct bailout only. Not the Fed cutting interest rates to help banks, or the Treasury trying to facilitate a merger between two banks to prevent one of them from liquidating. I'm not even talking about the Fed agreeing to take unusual collateral from a bank at the Discount Window. I'm thinking strictly of a direct bailout. This is the difference between "we'd rather it didn't fail" and actually "too big to fail." (2B2F from here on, unless that sounds too much like an Astrodroid?)

For the sake of this discussion, I'll use three actual companies as examples. I've heard professional investors and/or analysts suggest a Federal bailout as a possibility in all three cases should it become necessary. The three are Countrywide, Citigroup, and FGIC. We'll consider what the consequences might be if one of these firms failed in isolation, and whether the Feds would likely get involved.

Now let's look at some of the common arguments for 2B2F and whether they might apply to any of these three firms. If you have your own 2B2F rationale, please write in the comments. If we get enough good ideas, I'll write a follow-up.

Failure would induce panic in the markets.
You'd assume the Federal government only gets involved if the "panic" would have wider economic reverberations. Not just a steep stock market sell-off, but a real lock-up of the credit markets. As we've discussed before on this blog, expensive credit isn't a big problem. Unavailable credit is.

In order to argue for a Federal bailout, it would have to a situation where the Fed's normal liquidity operations wouldn't be effective, and that the bailout itself wouldn't cause just as much panic as the bankruptcy.

I can't imagine a situation where a Federal bailout of any of the three companies wouldn't induce panic in and of itself. So in terms of calming the market, I don't know what a Federal bailout would accomplish. In terms of stemming a "run" on Citibank, perhaps. But Countrywide's bank is too small, and FGIC wouldn't be subject to anything similar to a run.

Liquidation of assets would create an unacceptable contagion.
This is a better argument for bailing out Citigroup, as they have over $2 trillion in assets, most of which are financial assets. A fire sale of Citi's assets would certainly have a major impact on financial markets. However, the overwhelming majority of Citi's assets are not in mortgage-related securities. So under a scenario where Citi is insolvent because they took giant losses in ABS CDOs, you'd think there would be a buyer of the rest of their assets. It would seem as though the Fed could orchestrate a merger or at least a buyout of various Citi units. I'll note that Continental Illinois was far less diversified compared with Citigroup, the former having large exposure to the then sinking oil market. By all accounts, the Fed sought a willing buyer for Continental for a couple months before the FDIC eventually took an equity position. It would seem that Citi would have valuable parts, even if their CDO/ABS positions had sunk the whole.

Countrywide is drastically smaller than Citi, but their assets are more concentrated in the home loan market. It may be fair to say that Countrywide may have more assets in "problem" markets, like sub-prime HELOCs, at least as a percentage of assets. On the other hand, Countrywide with about $200 billion in assets is considerably smaller than Northern Rock was, and the BoE was able to orchestrate a buyout there.

FGIC wouldn't actually have to liquidate, they'd just run off the insured portfolio until there was nothing left. Whether or not there might be a buyer for FGIC would depend on various factors, but there doesn't seem to be any contagion risk to FGIC liquidating. Right now there are some large municipal buyers who hold FGIC-insured paper and have contacted other insurers about replacement insurance. If FGIC went bankrupt, there would likely be more of this.

The firm is an integral part of vital systems (e.g. check processing). Failure would cause a shut down of these systems.
This was a concern with Continental. And while Citi may be bigger and more deeply ingrained in our financial processing system, I'd like to think that technological advances since 1984 have eliminated this risk. Or at least made it such that the processing could be easily passed to another firm at a low cost. I don't know that much about bank's back offices, but it would seem like this could be accomplished.

Both Citi and Countrywide are very large mortgage services. Given the level of delinquencies and foreclosures right now, mortgage servicing is a critical system for the U.S. economy. We cannot have a situation where a large number of loans effectively have no service all of a sudden. My sense is that this too could be passed to another firm, although I admit I don't know enough about the servicing business to say this for certain. I'd just think that given how many loans are bought and sold routinely in the mortgage market, that there are good systems for passing servicing rights from one firm to another, which would be effective even if the service was very large.

FGIC is indeed an important part of the municipal market. However, in almost all cases, municipalities have paid for insurance up front, and if the bond rate is fixed at issuance, then the subsequent bankruptcy of the insurer is of no moment to the municipal issuer. Put another way, if the City of New York sold a municipal bond with FGIC insurance with a 4% coupon in 2005, it
will have a 4% coupon until the bond matures, no matter what happens with FGIC. New York doesn't care. Hence there would be no reason for municipalities to create political pressure to help out FGIC.

Now, its likely that a FGIC bankruptcy would cause some weird trading in the muni market. Recently Radian-insured bonds have traded worse than the underlying rating, implying that the Radian insurance makes the credit worse than had there been no insurance at all. Radian isn't even bankrupt, and in fact have had their credit rating affirmed recently. If FGIC actually went
bankrupt, all hell would break loose in secondary muni trading. But I can't see the Federal government seeing this as a good reason to bail out FGIC. And few municipalities, if any, would feel the pain directly. New issuers would just go to one of the other insurers, or issue without insurance. The muni market would eventually normalize and we'd all move on.

For what its worth, I can imagine various street firms getting together and buying FGIC, since the perceived value of muni insurance makes muni underwriting easier and hence more profitable. It may be that the street has their own capital problems and such a thing never materializes, but its worth thinking about.

Job losses would be too great.
While Citi certainly employs over 300,000 people (not all in the U.S.), I don't think this would be viewed the same as Chrysler was in 1979. First of all, government's attitude toward interference industry is quite different today vs. the late 1970's. There were also other pressures on the government, including the rise of Japanese auto makers, public fear that U.S. industry was becoming irrelevant, as well as union political clout. Citigroup wouldn't have any of this putting pressure on the government to bail them out. In fact, if I'm right that Citi's pieces could be sold, then the job losses would be small in the grand scheme of the U.S. economy.

Neither FGIC nor Countrywide employs enough people for this to be a serious consideration.

In sum, it seems like 2B2F isn't relevant to any of the big names where insolvency has been thrown around recently. The only two companies where I think 2B2F would hold would be Freddie Mac and Fannie Mae. Particularly now, when the disappearance of either would decrease liquidity in the mortgage market at a time when liquidity is sorely lacking. Over the years, commentators have greatly overestimated the cost (or implied that the cost would be greater) of bailing out either of the GSEs. The cost wouldn't have anything to do with the size of their mortgage holdings. It would be the size of their losses. So if you hear dollar figures starting with a "T" stop reading and find another source to read.

Let's hope it doesn't come to that.


Anonymous said...

Another super post. This blog is must read from the gitgo.

I do not have another 2B2F rationale. Personal ties with the Bush administration? Not so much.

But, having said that, it seems to me that it would be terrific if you could describe in as much detail as you can exactly what you think would happen if either of the three failed.

I would say, myself, that a run on Citi would produce a run across the board. So whatever happens, a run must be prevented.

And I can tell you that if I am even remotely near the mean, a run is not out of the question.

Anonymous said...

Another rationale? This is more of a secondary reason than a primary reason ... but how about if something big needs a lot of capital in a hurry (MBIA?) and the only buyer stepping up is the Al Qaeda Retirement Fund?

For what its worth, I can imagine various street firms getting together and buying FGIC, since the perceived value of muni insurance makes muni underwriting easier and hence more profitable.

I keep looking for one of the big Canadian banks to use its balance sheet (still very good up here) and strong currency (still well above PPP) to make a strategic acquisition. This has sort-of happened already with TD Bank & New Century.

A Canadian bank buying a bond insurer might not have the same synergies as a US Street syndicate - but might be perceived as a more credible guarantor.

Anonymous said...

So in your opinion, do you think that Citi will let their SIVs sink or swim instead of bringing them back onto the balance sheet?

If they don't support the SIVs, does that start a chain reaction in CDS, CDO, muni & pension land?

If Citi does get broken up and sold for parts, would the purchasing banks get a low enough price for the assets to permit bringing the SIVs onto their balance sheet?

Accrued Interest said...

Citi has a guarantee on some of their SIV CP. I do now know what percentage of all SIV paper it is, but I see it offered for sale every morning.

So they really don't have a choice.

James: I'd think there are several players out there who might be interested. I mean, with the shares of MBIA & AMBAC trading at such a deep discount to book, it would seem that there are some firms who have to be looking at them.

A run on Citi? I don't know. And I mean that. I don't. There wasn't a run on Countrywide bank, not like the classic runs of years past. But I doubt many people had more than the FDIC limit on deposit there. Personally, I think if you have more than $100,000 on deposit at any bank, you should move it out. You just can't know when another Barings Bank situation will arise. I mean, its safer having it at a brokerage invested in T-Bills.

Sivaram V said...

Wow. Your comment about a Radian-insured bond trading below a non-insured rating strikes as being beyond bizarre. How is that even possible? Based on your experience, do, what I perceive as an irrational thing like that, happen in the bond market? I'm not sure how to look at that. There are all sorts of irrational things in the stock market because it is complex and an investor is discounting multiple factors and varying earnings into perpetuity. But how can you have an insured bond trading worse than an uinsured bond? Couldn't someone arbitrage that away?

Anonymous said...

I was wondering if you could do a post on the unintended consequences of the subprime bailout. I see all these folks come on CNBC and for the most part say how great this bail out is going to be. When politicians do anything; its to reduce the bad pr, or take care of their friends, not to fix the problem, in my opinion.

When I see 195 firms on the mortgage implodometer, I have to think capacity in the mortgage business is dropping, inhibiting future ecomonic growth. When I see that the guys holding the bag will be the people who bought the securities, and they are about to be crammed down, and in all the discussions are treated as an afterthought. How in an economy built on credit will the securitization mechanism continue, when the moral hazard will be so high from now on.
The whole situation for Citi, Merrill and others has to be much worse than let on or Paulson would still be saying its "contained", only when it started to get to his financial friends, did subprime become a problem.

Thank you.

Anonymous said...

BoE has not yet orchestrated a buyout of Northern Crock; it is looking increasingly likely they'll nationalise it.

I can imagine the hand wringing in Washington if Hugo Chavez stepped forward to bail out a 2B2F.

Unknown said...

AI, do you have any thoughts about what prompted Moody's change of language on MBIA? It seems that they just published an eval of MBIA in early October and rated their capital more than 19% above their excess requirement at that time (1.55x vs. 1.3x): Moody's report

Given the short duration, it seems more likely that Moody's is changing their rules rather than something changed with MBIA. Could it be that Moody's is listening to Ackman and basically just decided that they no longer think so highly of the guarantor business model - for example, because they now side more with the market and no longer believe it's possible to greatly diversify risk across different RMBS loan pools because they are all keyed to housing prices? If so, would it make sense for the guarantors to investigate hedging with something like Shiller's housing futures?

Anonymous said...

Moody's Press Release, Dec 5

Under the second approach (the "stress case"), we are refining the stress case simulation model described in Moody's September 25, 2007 report on the financial guarantors' exposure to mortgage risk within ABS CDOs. Rather than applying the broad subprime collateral performance assumptions used in that earlier stress model, the new model draws upon Moody's pool level performance assumptions for individual RMBS collateral types, thereby incorporating differences in collateral performance by vintage, asset type and lender. In addition, the new model also considers the impact of projected timing of losses.
And with regard to MBIA, additional analysis of its direct RMBS portfolio leads Moody's to believe the guarantor is at greater risk of exhibiting a capital shortfall than previously communicated; we now consider this somewhat likely.

Anonymous said...

What a blog! I mean it.

When Accrued Interest says that anything over $100,000 (or whatever the limit is) should be in Treasuries, I suggest that people listen. I'm just sayin', but take it seriously.

Anonymous said...

I wonder how much of the money going into the stock market right now is coming out of fixed income?

The yen has moved up, so some of it is "hot" carry money.

If a lot of it is coming from the fixed income world, then we are in deep, deep doo-doo.

Sell your stocks now. Sell.

Unknown said...

James, I saw the Moody's press release earlier and noted that it specifically referred to reconsideration of MBIA's direct RMBS portfolio along with new modeling assumptions. But I'm really interested in trying to figure out how Moody's is specifically playing with the numbers. From stuff on MBIA's website, I work out that as of Sept. 30, their direct RMBS par outstanding was about $54 billion (weighted average A rating, with subprime portion at $5 billion with AA rating and altA portion at 2.8 billion) and they had about $15 billion of total claims paying resources (and currently about 160 million/year in operating earnings). So if the change to Moody's worst case scenario was all coming out of the direct RMBS, that would mean the worst case max shortfall on that portfolio is now about 3.7% higher than in the earlier calculation from the Oct/Sept time frame.

Digging a little more, most of MBIA's "prime" stuff is actually HELOCs and CES from originators like Countrywide. That sounds scary, though built in credit enhancement that is apparently typical in these deals may make it not so - e.g. as explained in these comments from AGO on some CountryWide HELOC's (possibly reinsured from MBIA), it sounds like they don't really end up costing much: AGO call

Anonymous said...

It seems to me MBIA and AMBAC are 2B2F. That would trigger massive downgrades of bonds, which means big losses all around. It would be much cheaper for the country to avoid those losses by salvaging MBIA and AMBAC.

Anonymous said...

A couple of thoughts re Countrywide and the monolines. I would suggest that while these companies are not indispensible and therefore 2B2F, the price required to bail them is much less than the cost of either not having them or replacing them.

Countrywide may be a stretch as other broker/lenders could fill in the breach, but they still have a pretty high percentage of originations.

The monolines are more interesting. I am guessing that it would be pretty hard to to start one of these, even if you are Berkshire or AIG. I am also guessing that the size of any required capital infusion is much less than the costs of losing their AAA rating, e.g., losses on outstanding debt and increased costs of future debt.

Anonymous said...

How about the counterparty risk associated with a Citi insolvency?

How many other institutions out there would suffer write downs and potential insolvency if Citi is no longer available to pay its bills?

How many large banking institutions have "off-setting" derivative positions, that would no longer be off-setting if Citi went away?

I think this is really the big concern. Slightly different that the liquidation of assets contagion AI describes. A Citi bankruptcy could cause a bankruptcy contagion in the global financial services industry - or at least, that's the main concern I think regulators would be looking at.

Anonymous said...


TD didn't buy New Century. TD bought Commerce Bancorp. Two very different businesses.

Accrued Interest said...

There isn't much to say on MBIA. All Moody's is saying is that when they tweaked their modeling, MBIA came out marginally worse than they assumed. So if that's what you mean by "changed the rules" then yes.

Now MBIA is saying that they are going to raise more capital regardless. I read that as MBIA tacitly admitting that they'll take some serious losses and so they're going to raise capital regardless. I'd trust MBIA to know their own portfolio more than Moody's to model it correctly.

I agree with the posts saying that bailing out a monoline, or even ALL the monolines wouldn't be that expensive. But given that fact, it seems likely that a willing merger would occur rather than a govt bailout.

I want everyone to realize, however, that when the ratings agencies are talking about monolines needing more capital, this is in reference to retaining their rating. Not survival. So if MBIA manages to raise more capital, then the Aaa will be affirmed by Moody's and everything will go on as is.

Lasttoknow: The subordination is supposed to make the chance of large losses remote. I think it will work with direct RMBS exposure. Maybe there will be losses, but large losses on a given pool will be rare. I don't think it will work with ABS CDOs.

Counterparty risk is a toughie. I would suppose that other firms could take over the swaps that Citi had backed. I mean, that's what happened with Refco. Obviously a Citi bankruptcy would be far more complicated due to size. If a willing merger partner was found, then Citi's counterparty would go with it.

Accrued Interest said...

Also, I thought Virgin was buying Northern Rock. Did that fall through and I didn't hear about it? I know Cerberus made an offer also.

Accrued Interest said...


The Radian thing is an obvious inefficiency, but the muni market is highly inefficient. There are a couple reasons, but the biggest is that its nearly impossible to short municipals and its hard to get leverage. So arbitraging small inefficiencies is difficult. You pile onto that the fact that dealers are crunched for capital, and the market becomes even more inefficient. God I wish I were back on the muni desk. That was fun.

Anonymous said...

James, TD didn't buy New Century. TD bought Commerce Bancorp. Two very different businesses.

Quite right. How embarrassing.

Anonymous said...

MBIA and ABK and SCA are 2B2F not for the Feds, but for the broker/dealers who traffic in the structured stuff. In fact they are 2B2LoseTheirAAArating and if they need capital, then those guys will find it for them because the Morgans and Lehmans of the world are most at risk of having massive writedowns and losses if the insurance on their exotic structured assets is worthless. Not the same as a Fed bailout but just as bad for the ppl betting against them.

Anonymous said...


A question for you. MBIA is looking to raise capital, which you indicate is a tacit admission that they will take significant losses. I'm not convinced this is the case.

The rating agencies require differing amounts of capital to be held against insured bonds of different credit ratings. So if an insured AAA tranch is downgraded to a AA rating, the MBIAs of the world are required to hold a little bit more capital.

Couldn't it be the case that significant downgrades lead to the need to raise capital without any actual pay outs on the horizon?

Anonymous said...

Could the collapse of ACA cause a lot of dominos to fall" quote..

..."Banks and brokers could suffer billions of dollars of losses from derivative credit protection they bought from ACA if the company collapses. ACA's losses will be Wall Street's as well, a credit derivatives trader said. ACA sold billions of dollars of credit protection using derivatives to Wall Street firms, which in turn sold similar protection to other customers.

If ACA is unable to make good on its end of the trade, Wall Street firms will lose money on the protection they sold, and will not be able to record gains on the protection they bought. Banks and brokers could lose billions of dollars, the trader said.""

Feel sorry for me. One of my muni's looks like it just went to a NR status because it was ACA insured.

Anonymous said...

As always interesting. For the monolines, it is likely that if the worst occurs, that the stocks and parent co debt is toast, but that the regulators (NYSID) will step in to do something. Simply slowing the business will generate capital as will curtailing the dividend to the parent co.

"Failure" of the monolines will likely result in runoff, a long somewhat slower process than bankruptcy that would give the markets time to adjust, start new bond insurer, etc. The parent company would fail, but the government could support the runoff at very low cost to taxpayers, as really they just need to insure that payments of failed bonds are made after all of the claims paying resources of the insurer are spent. In your analysis of the 2B2F of the monoline you did not include bondholders, especially of munis. Now we all agree that muni losses are improbable, but these are the investments that people with the least financial knowledge (generally less affluent or retired people), but with political power (AARP) and MOST IMPORTANTLY votes make. Can't you just see some little old lady at a congressional hearing saying:"They told me it was the safest investment, now I am down 10% and it worries me."

I would say that a monoline might fail in the sense that the parent is in bankruptcy, but I believe that it is highly likely the government put a wrap of some kind on the insured debt to guarantee payment.

Anonymous said...


Virgin offered a bid, but shareholders aren't happy about being asked to pump in more capital. Decent chance that either Virgin or one of the other suitors is accepted, but nationalisation is still a real possibility.

Anonymous said...

Somewhat OT but . . .

Top CDO Classes May Lose 80 Percent, Barclays Says (Update1)

By Jody Shenn

Dec. 6 (Bloomberg) -- U.S. mortgage assets in collateralized debt obligations have lost so much value that the top classes of the securities may be worth as little as 20 cents on the dollar in a liquidation, Barclays Plc analysts said in a report.

About 20 percent to 30 percent of principal would be covered for the ``super senior'' portions of mezzanine asset-backed bond CDOs, which mainly contain mortgage bonds and other CDOs initially assigned low investment-grade ratings, Barclays said in the report yesterday. The senior-most classes of CDOs containing highly rated asset-backed bonds would recoup 30 percent to 65 percent, it said.

Karl Smith said...

Here is a question on another topic. Sorry for posting here but I didn't see an email.

So, how does the payments work out on structured ARM debt and how will they be affected by the freeze.

Are the tranche payments themselves indexed. If so are they indexed the same for all tranches.

Or for example is there a fixed coupon for the Senior tranches and the gravy accrues to equity.

DAB said...

Back to too big to fail. Citi is too big to fail. Remember that there had been no run on a British Bank for over a century when Northern Rock experienced its run. If such a situation were to happen to Citi, no private sale could hive off business units fast enough to raise cash. The government would have to step in to save the whole thing in the short term to save the pain to individual investors (depositholders who are voters) upon which the premise rests.

Business units don’t just trade. They have to be sold over a period of months if not years, and if you tried to sell something major while a run was ongoing or imminent, someone would go to court and bog the whole thing down. Having the courts involved while a crisis is unfolding is the last thing that anyone other than the plaintiff would want…

Accrued Interest said...

Insurance Guy: Yes. Fair point. I ammend my statement to say that MBIA knows the risk of their portfolio is rising and assumes they'll eventually have to raise capital one way or another.

Dave M.: I've heard this argument before, but I don't think its got the whole story right. First of all, I think counter parties get first dibs in BK. Second, if ACA runs off, then they continue to perform on the CDS. Third of all, the Street could find other buyers for the risk.

DRPI: I've written about this before. I think ABS CDOs are going to take huge losses. Even the senior stuff.

Karl: accruedint AT Its at the very top of the page. Anyway, to explain that will take a whole post. That will be today's post. AND I'm not sure anyone knows right now what the impact will be.

flow5 said...

In certain areas the Fed's powers are indeed awesome.

Without the Fed’s involvement,the Continental Illinois Bank would have failed. The FDIC’s reserves were simply inadequate to meet the challenge of a wholesale run on the Bank, and the probability of runs on other banks, both large and small.

Because of the billions of dollars on deposit by foreign corporations, it is not an exaggeration to say that the Bank’s failure would have eliminated the dollar as the principal reserve and transactions currency of the world.

If the failure of a few small savings and loans in Ohio would, even temporarily, depress the value of the dollar on the foreign exchanges, certainly the actual loss of billions of dollars by the foreign business community would have had disastrous effects on their confidence in the dollar.

From the standpoint of foreigners, the losses logically would be attributable, not to ordinary commercial causes, but rather to flawed money and banking system. If one of the largest commercial banks in the country could fail, what of the rest?

How did the Fed prevent the Bank from failing? The Fed has had for many years the power to create any amount of IBDD’s (Interbank Demand Deposits). There are no reserve or reserve-ratio restrictions on the credit-creating capacity of the 12 Federal Reserve Banks.

The newly created IBDD’s can be put at the disposal of any bank in the System through the “discount window”. These deposits are not only money to the recipient bank, they also become a part of the legal reserves of the System. And therein lies a limitation.

The Fed cannot increase the legal reserves of the System without creating the basis for a multiple expansion of the money supply (multiple in terms of the incremental reserves). Therefore, a rescue operation of the Continental Illinois’ dimension must be limited and of short duration.

Both of these objectives were achieved. When the credit of the Fed was substituted for that of Continental Illinois, depositors knew they could “get their money”. Consequently, the “run” on the Bank was reduced to management proportions, and runs on other banks were forestalled.

flow5 said...

On May 1984 the Fed was using the net free (or net borrowed) reserve position of the member banks as a day-to-day guide in executing open market policy. That is, when borrowings from the Fed exceed excess reserves (reserves in excess of required reserves) of the member banks, buy orders in the open market are executed.

Although this is an accommodative procedure, it does not contain the inflationary bias inherent in attempting to peg the federal funds rate.

The Fed can, and does, offset borrowings with open market selling operations, thus eliminating any net increase in bank legal reserves.

The Continental Illinois bank (the 7th largest U.S. bank) bail out provides a spectacular example of this practice. Any net increase in legal reserves (the Bank was advanced over $6b) is thus optional.

flow5 said...

The Fed and the FDIC will not allow the largest banks and their branches to fail in terms of the banks' depositors, but the stockholoders' equity may be reduced or eliminated, as in the case of Continental Illinois.

Banks "safety nets" performed for many years beyond their legal obligations in protecting the public's savings and deposits. The insuring institutions chose mergers rather than liquidation of failing institutions, even though this alternative was generally more expensive. As a conseqence, depositors received total protection, not a limited legal protection.

Because bank failures have since been reduced, the FDIC has reduced their annual insurance levy.

flow5 said...

Some money center banks in the late 80's (read New York) had defaulted Latin American loans on their books sufficient to wipe out their entire net worth. They eventually recovered from their losses/mis-managment.