Comments on The Fed Abstracting Away Banking Pain

Fricking genius illustration. Just lovely work. Thank you!

You're one of the best things going for this paper, Science.

Jonathan, pull your money out now. WaMu has lost access to the repo loan market and the rate they have to pay on commercial paper has gotten bigger. People who sell CDOs on WaMu have started requiring cash up front an increased their rates to 13%. That translates into them betting that the odds are 50% that WaMu will default within five years. It probably won't affect you, since you're under the $100k mark, but save yourself the potential trouble.

Thank you for this (with absolutely no hint of snarkiness)!

But I don't waaaaanna pull my money out of WaMu!! I've had genuinely good customer experiences with them!

Oh, just go with BECU or WSECU or SECUWA like the rest of us, Ben.

Another masterful post. Your ability to take abstract and sometimes difficult concepts and distill them down so that non science, math, econ people can understand them is awesome. Having worked as a technical writer for years I know how hard it is to do that and how much talent as a writer it takes. You are an asset and we're lucky you take the time to Slogucate us.

WaMu isn't going anywhere. Their stock price and profits may suffer for a few years, but they are very well capitalized and have a ton of liquidity. They overexposed themselves in the mortgage market, but they have enough other products that they will survive.

Jonathan will eventually bring SLOG to ruin if he continues approaching every issue with facts and common-sense explanations rather than knee-jerk emotional reactions.

Seriously, great job.

I've got $ in WaMu too (because they bought out Great Western Savings & Loan years ago), and have been worried because its stock has hovered between $3 and $5 a share for the last month. Stories of J P Morgan buying them have been in the news since January. I can't figure out why WaMu's got such a low value right now, compared to most "financials" because there hasn't been any news of of them suffering losses, because of massive subprime loan defaults.

FDIC is an insurance organization, and as such the money that is used to cover bank failures comes from premia paid by the banks themselves. Furthermore, the amount they pay depends on how likely they are to go bankrupt (based on risk of investments and the amount of reserves they keep).

Ultimately, like all insurance, we all pay a small portion of our deposits to guarantee against catastrophic failure. You may not like that you haven't been given a choice in this matter, but it's not some sinister scheme.

the collapse of these banks is terrifying and i'm totally weirded out that no one is really conscious of the precipice the entire banking system is teetering over.

jonathan golob is fucking awesome. that's all i have to say.