Let me pose a question to you.
Let's say you own a $200,000 house free and clear.
Let's further say that you would like fire insurance. Just in case you are a klutz in the kitchen, for example.
So you sit down and write yourself a fire insurance policy. You promise to pay yourself $200,000 to rebuild your house if it burns to the ground.
You then put your "insurance policy" in the safe and pat yourself on the back - you're insured!
Now, you want to re-do your kitchen and add a pool, so you go to the bank to get a mortgage to finance those improvements.
The mortgage company would accept your self-written policy as proof of insurance, right?
Oh wait - they'd call that fraud?
Senior regulators say they are seriously considering a plan to have the nations healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.
The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.
Of course it would. Writing insurance on yourself is a highly-lucrative business, especially when you can charge interest to the supposed insurer who you are supporting!
Insurance is supposed to work the other way around - you are supposed to pay into a pool to cover the risk of loss that some people in the pool might suffer.
Who would have thought that a government agency would actually contemplate paying the insured party for the coverage on their own risk?
In a world where we had a rule of law this would be identified instantly as what it is: rank, outrageous fraud.
But we don't live in such a world.
In the world we live so-called "government officials" of the FDIC feel free to engage in such sham transactions, smug in the knowledge that The American Sheeple, along with their handmaidens in Congress, can be counted on to allow a blatantly-fraudulent exercise such as this to be consummated - where the banks that are beneficiaries of FDIC insurance (and whom have also issued literally billions of dollars in covered bonds on an issuance-insurance program that has no legal basis in the foundational principle of the FDIC in the first place) not only do not have to pay for the insurance coverage they enjoy, but actually get paid to have it instead.
I couldn't make stories like this up if I tried.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.
Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.