TAI Spring Side Chat Focuses on Intangible Collateral in Financial Crisis

Wed, 2008-10-01

TAI Spring Side Chat Focuses on Intangible Collateral in Financial Crisis

Berkeley Springs, WV and Charlottesville, VA &#8722 October 1, 2008 −− Eric Best of Best Partners wrote an opinion piece on Dr. David Martin's Second TAI Spring Side Chat during which the current credit crisis was discussed in the context of the global financial system. His observations included:

Congress' move to increase insurance is understandable, reflecting their desire to "Do something now!" to make the general public feel better about the credit crisis and its potential (impending?) impact on their bank accounts. If people wonder, "Hey, what have they done for me lately?" this might give some comfort.

But does it reflect an appropriate grip on reality and a sense of priorities? The FDIC at the end of the second quarter increased the number of problem banks on its watch list from 90 to 117. Others have predicted that over the next few years as many as 400 banks with assets of over $300 billion will fail. Against these potential losses the FDIC has only $45.2 billion in its insurance fund now against total insured deposits of $4.5 trillion.*

Making an adjustment in FDIC insurance to reflect inflation since 1980 seems to ignore the underfunding problem by multiplying it by 2.5. Is this comforting?

Everyone seems to be grappling with different pieces of the problem. Yesterday we drove to West Virginia for a meeting hosted by the Arlington Institute in which Dr. David Martin, chairman of M·CAM and a fellow at the University of Virginia, held forth in a 2-hour disquisition on the state of the markets and the near term future. Life ain't gonna be like it used to be, according to Dr. Martin.

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U.S. Financial Crisis Speech

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October 2007 Forecast