Ralph Nader’s Revenge

Reader Zuzu’s Petals digs up the relevant NY Times story from 1995 that describes the mindset when they decided to stop requiring banks to pay FDIC premiums:

The Federal Deposit Insurance Corporation decided today to virtually eliminate deposit insurance premiums for most commercial banks after concluding that its insurance fund had enough money to cover bank failures in the coming months.

Bankers welcomed the unanimous decision by the agency’s board, which will take effect on Jan. 1 and save them $946 million a year in premiums. Industry lobbyists waged a vigorous campaign to eliminate the premiums, arguing that they were unnecessary after the Bank Insurance Fund late last spring reached its Congressionally mandated target of $1.25 in reserves for every $100 of insured deposits.

Ricki Helfer, the chairman of the F.D.I.C., said premiums needed to be reduced because of the banking industry’s current health, the economy’s strength and the expectation of F.D.I.C. examiners that few banks would fail soon. Premiums will still be collected for some banks with risky business practices and less solid finances. Still, the income from premiums as a share of insured deposits will fall to the lowest level in the 62 years of Federal deposit insurance.

Consumer activists and even some of the board’s members criticized the decision. “Under a better system, we would be allowed to build up a surplus in better times that we would run off in bad times,” said Jonathan L. Fiechter, the acting director of the Office of Thrift Supervision and one of the four sitting members of the F.D.I.C.’s board.

But Mr. Fiechter voted for the premium reduction anyway, saying that current law left the board with little choice once the fund had clearly met the target for reserves.

Ralph Nader, the consumer activist, contended that the $25.08 billion now in the Bank Insurance Fund could be exhausted easily by the collapse of one or two of the giant banks now forming from the industry’s many mergers, leaving taxpayers with the burden of paying for any further failures. Today’s decision “is a prescription for another round of corporate bank welfare,” he said.

At some point, I don’t know when, idiots like me are going to be ignored and the folks who time and time again have been proven right will be given a say. And Jonathon Fiechter, who knew what he was doing but voted the wrong way anyway, deserves a special kick in the junk. Oh- look! Ari Fleischer, who spent the last eight years either being wrong or lying about everygoddamnedthing, is being rewarded with another appearance on Hardball.

When I was in the Army, a popular phrase was “F— Up, Move Up,” because the people who screwed up always seemed to get promoted, while the ones who were right are either punished, ignored, or some combination of the two. I am glad to see this is the guiding principle for our government, too.

*** Update ***

From the comments:

I think there’s a misunderstanding here. The premiums were reduced in 1996 because the fund had reached its statutory reserve level. That wasn’t so much the problem. Everybody was happy. (Except the thrifts, which had by no means reached theirs—but that’s another story).

The problem really came about five years later (2000/2001) when the FDIC realized that many changes in banking (such as increading levels of consolidation), plus inflation, had made that reserve level too low, and there was no way for them to change it. Also, newer banks, which themselves had never paid any premiums, were unfairly coasting on the previous premiums made by older banks. And many other complications with the system.

That’s why in 2001 they lobbied congress for statutory authority to have flexible control over the reserve levels, to match the actual state of the banks. Congress did not make banks start paying premiums again until 2006. So, as Bair, puts it, “five years were wasted.”

It is more complicated than just that they stopped collected premiums, with apologies to Fiechter.






42 replies
  1. 1
    TenguPhule says:

    When I was in the Army, a popular phrase was “F—- Up, Move Up,” because the people who screwed up always seemed to get promoted, while the ones who were right are either punished, ignored, or some combination of the two. I am glad to see this is the guiding principle for our government, too.

    Whatever happened to Good Old: Come Back with your Shield or On it?

  2. 2
    demkat620 says:

    If its any consolation John, the dirty, fucking, hippies are not happy about having been right.

  3. 3
    TenguPhule says:

    Ricki Helfer, the chairman of the F.D.I.C., said premiums needed to be reduced because of the banking industry’s current health, the economy’s strength and the expectation of F.D.I.C. examiners that few banks would fail soon.

    The People’s enemy has another name.

    Break out the kerosene and flamethrowers.

  4. 4
    Rosali says:

    Ralph Nader may have been right on the FDIC but I’m still not willing to forgive "A vote for Gore is a vote for Bush". I’m from Florida and I have a long memory.

  5. 5
    Laura W says:

    All your questions will be answered tonight, John Cole.
    Meghan McCain on Rachel!
    yeeeeeeeeee haaaaaaaaaaaaa.

  6. 6
    Brian J says:

    Why would the industry lobby to have the premiums done away with? Did this simply give them more money to play with? Where else could the money that was being used to pay premiums have gone?

  7. 7
    Zifnab25 says:

    Bonuses! Bonuses for everyone!

  8. 8
    KG says:

    "fuck up, move up"

    This actually makes a lot of sense. The best place to have people that don’t know what the fuck they are doing is where they can do the least damage: middle management. You need the highest ups and the grunts to know what the fuck is going on and how things work. The guys in the middle are just there for show. Unfortunately for the eager grunts, they have to spend time in middle management purgatory in order to become one of the highest ups.

  9. 9
    gex says:

    Premiums will still be collected for some banks with risky business practices and less solid finances.

    Um, didn’t mostly all of them have risky business practices and less than solid finances? So in otherwords, this was a total lie.

  10. 10
    QrazyQat says:

    Apparently the law said that the reserves needed to be "between 1.15 percent and 1.5 percent of all insured deposits" so if they were at that upper threshold Fiechter really had no legal way to do other than vote for the premium reduction.

  11. 11
    Litlebritdifrnt says:

    John there are two ways of getting rid of idiots, you either fire them or promote them, cause there is no fucking alternative. In this case firing them was not an option so they chose the promotion route. You and I have both been in the military, we KNOW this to be true, you and I have both been there, there is that snot nosed second lieutenant who couldn’t tie his shoes without instructions in writing and yet the only way of getting him the fuck out of our unit is to promote him into the next unit who will then have to deal with him. It is sad, it is sorry, but it is reality.

  12. 12
    Rick Taylor says:

    @QrazyQat:

    The premiums weren’t collected for 10 years. I’d like to see it confirmed one way or the other, but perhaps the reserves below that range in the mean time? Of course whenever you end some government tax or fee, it’s politically nearly impossible to start it up again.

  13. 13
    Litlebritdifrnt says:

    Hmmm I’m in moderation, either I really pissed John off or I mistyped my handle….

  14. 14
    JenJen says:

    When Jamie Dimon Attacks!! (via Baby Blue Satan)

    "“When I hear the constant vilification of corporate America, I personally don’t understand it,” Dimon said in his speech. “I would ask a lot of our folks in government to stop doing it because I think it’s hurting our country.”

    Stop it, you guys!! Sniff. Moop.

  15. 15
    Comrade Stuck says:

    @KG:

    This actually makes a lot of sense. The best place to have people that don’t know what the fuck they are doing is where they can do the least damage:

    This was true in every one of several jobs I had with the feds. Though you would have your occasional odd fuck up so thick they believed merit was behind their advancement. In those cases, some aministrative fragging from we troops was in order to balance the yang.

  16. 16
    JasonF says:

    And Jonathon Fiechter, who knew what he was doing but voted the wrong way anyway, deserves a special kick in the junk

    The way I read the article, it seems that Mr. Fietcher felt that the vote to stop collecting premiums was required by the statute. Which makes you wonder why they bothered to have the vote at all but that’s bureaucracy for you.

  17. 17
    priscianus jr says:

    I think there’s a misunderstanding here. The premiums were reduced in 1996 because the fund had reached its statutory reserve level. That wasn’t so much the problem. Everybody was happy. (Except the thrifts, which had by no means reached theirs — but that’s another story).
    The problem really came about five years later (2000/2001) when the FDIC realized that many changes in banking (such as increading levels of consolidation), plus inflation, had made that reserve level too low, and there was no way for them to change it. Also, newer banks, which themselves had never paid any premiums, were unfairly coasting on the previous premiums made by older banks. And many other complications with the system.
    That’s why in 2001 they lobbied congress for statutory authority to have flexible control over the reserve levels, to match the actual state of the banks. Congress did not make banks start paying premiums again until 2006. So, as Bair, puts it, "five years were wasted."
    Donna Tanoue, chair of the FDIC left in 2001 (I wonder why?), and was replaced by Donald E. Powell:
    http://www.fdic.gov/about/meet/
    For more, see my comments on the other thread, "You Have to Be Shitting Me."

  18. 18
    uila says:

    Not to bring the math, but… saving the banks a billion per year in premiums since 96 leaves the FDIC short, what, $12 billion…. that’s like a fart in a windstorm to the crisis. Nevertheless, it’s the principle of the thing, and I remain outraged.

  19. 19
    Joshua Norton says:

    Too bad Nader went from being a good advocate to a lousy candidate. A lot of this mess is thanks to his help in causing the Gore cluster fuck in Florida.

  20. 20
    The Moar You Know says:

    The worst part about this whole thing is that it forces me to give some credit to Ralph Fucking Nader, who I hate.

    A truly bipartisan fuckup here. Wish I could blame the other guys. Well, I still can blame the other guys, but this is on Dems heads as well.

    Good going, government.

  21. 21
    El Cid says:

    Ralph Nader was always a good enough guy and impressive advocate until the whole running for President bug struck, and then there was no backing down. Maybe he was always that egomaniacal and bitter and it just didn’t show until then. I dunno.

  22. 22
    Rainy says:

    I really don’t understand the corporate media. It’s like oh, the Democrats believe A but the Republicans believe B. Let’s talk about B and have Republicans on all the time to tell us what they think about B. I remember reading somewhere that an anchor on some network said they already know the Democratic position, so they just wanted to hear what the Republicans think.

    Chris Matthews has Tom Delay on his show all the time, like he is some kind of go-to guy on this kind of crap. Now he talks to Ari Fleischer, who has been going all around trying to revise Bush history. Karl Rove is doing this crap too.

  23. 23
    cmorenc says:

    I sorely wish Ralph Nader would have forgone any deluded narcissistic runs at the Presidency, especially since his belief that there was no meaningful difference between Al Gore or George Bush has proven so disasterously wrong. Because unfortunately, his vanity runs have severely damaged his otherwise extremely valuable contributions as spot-on sagacious critic and activist against the mendacious corruption, stupidity, greed, and callous indifference to the public interest, health, and safety committed by corporate America and its government. Instead of being honorably regarded as a near-sainted selfless crusader (as his legacy might otherwise deserve), he’s amply earned heaps of virulent disrespect and scorn for his damaging, delusionary self-indulgent vanity campaigns for President, where he’s never expressed even a microscopic bit of accurate insight, acknowledgement that he was wrong, or sense of regret.

    We are all unfortunate that the pre-2000 constructively influential version of Ralph didn’t survive past 2000.

  24. 24
    TenguPhule says:

    John there are two ways of getting rid of idiots, you either fire them or promote them, cause there is no fucking alternative.

    Wrong.

    There is a third option.

    In Vietnam, I believe it was known in polite circles as "fragging"

  25. 25
    Brian J says:

    I hope this question isn’t too stupid, but how exactly is the cost to the FDIC determined? I was under the impression that the deposits you and I make didn’t really impose a cost in the sense that there was never really much of a need for the body to cover them over a certain amount, especially if, in the case of Washington Mutual and JP Morgan Chase, it was essentially a sale of allowing one service to be provided by another body. In other words, I always thought that it wasn’t as if Bank A had XXX in deposits by the public, and the cost was about XXX to the FDIC. Is that correct, or is there a whole other level of issues that needs to be dealt with when a bank is taken over?

  26. 26
    big woo says:

    Gah. I’m still pissed about the Corvair. Ralph Nader set his sights on an early American attempt to develop a decent handling small car and helped strangle it in the crib.

    His political instincts were quite similar after that.

  27. 27
    Leelee for Obama says:

    @demkat620:

    Yeah, we DFHs really are not celebrating this mess. I said in another thread the other day, I’ve never been so sorry I was right.

    Unlike the Wingnuts, we really don’t hope that they fail. We just expect it. The difference is lost on them, because to them, it’s all the same. If they can’t win, the Country should suffer. Slavery, the Civil War, Jim Crow, laissez-faire. It’s a long history of them never giving up, even when the Country is damaged.

  28. 28
    Linda says:

    I think there’s a misunderstanding here. The premiums were reduced in 1996 because the fund had reached its statutory reserve level. That wasn’t so much the problem. Everybody was happy. (Except the thrifts, which had by no means reached theirs—but that’s another story).

    The problem really came about five years later (2000/2001) when the FDIC realized that many changes in banking (such as increading levels of consolidation), plus inflation, had made that reserve level too low, and there was no way for them to change it. Also, newer banks, which themselves had never paid any premiums, were unfairly coasting on the previous premiums made by older banks. And many other complications with the system.

    Thanks for the information, at least I can go back to feeling better about the Clinton years. If the law said they had reached the maximum then there was little that could be done about it, especially because we had really important issues to be dealt with. Like nonexistent scandals involving Whitewater, who killed Vince Foster and blowjobs in the White House. A little thing like keeping the FDIC solvent was obviously less important than those issues.

  29. 29
    Emma Anne says:

    @big woo:

    Yeah, as a Making Light reader I am still pissed about Cylert, one of the few drugs that works for narcolepsy, but Nader knew better than the sufferers.

  30. 30
    TheOfficialHatOnMyCat says:

    Oh- look! Ari Fleischer

    Yes, but I must say, Matthews went after him like a pit bull tearing into a pound of bacon.

    My gawd, that Fleischer is a complete ass.

  31. 31
    Zuzu's Petals says:

    First off, Whoo! for me for making the show! Or my link, anyway.

    Second, glad priscianus jr’s comment was included,
    cause I think those are real leavening factors. And as much as a surplus might have been a great idea had it been authorized, I don’t think any reserve level would’ve been enough to deal with the potential mess here.

  32. 32
    Hyperion says:

    It is more complicated

    You’ve said a mouthful.

    It’s a waste of time to bash whoever is in the cross-hairs at this very moment. That person will shortly be replaced by the subject of the next revelation as the layers get peeled back.

    There is NO remedy because complexity is the core problem. Humans cannot cope with this level of complexity. If our congress members had to read AND understand AND then debate every part of every law, not enough laws could ever get passed. It seems that some things cannot be streamlined or accomplished quickly or simply. These incredibly lame recent fiascos–"oops, something has not been working like we thought it was." or "oops, something was slipped in at the last moment." or "oops, we thought THEY were in charge of this."–are evidence of system failures.

    How do we insure that all the things that must happen to keep our very complicated lives running smoothly actually do happen? How do we even list those all of those things? I begin to doubt that it can be done.

    Designing and building a jumbo jet is also complicated but it is a finite and concrete problem. In 2009 governing a republic in seems the more daunting task.

  33. 33
    Mr Furious says:

    I still can’t get my head around the fact that somebody thought an insurance reserve of 1.5 percent of the total deposits was sufficient…

    How is that different than everyone in a city paying premiums for car insurance only to find that they were all buying into a policy that could only cover my neighbor’s ’88 Prelude.

  34. 34
    bago says:

    That shitwit Ari needs to be introduced to war. Ideally at 3500 feet per second.

  35. 35
    argh says:

    Ralph Nader ran for President to have a chance to debate Bush and have some microphone-time. The man seemed to believe that Americans were not being given the truth about the sold-out Dems and that the Middle Class needed representation and a voice. The convenient lie was that Nader changed his spots and became an ego-maniac.

    How ironic that the "progressive" reform Dems silenced the man the Corporations could not. And how strange that so many could watch the Bush years and Democratic capitulation over and over and over and over again and still never understand. And btw, the fantasy-wonderman Gore (with his VP pick Lieberman) surrendered, and then that vaunted would-be champion of America chose to work as a Venture Capitalist instead of leading a reform movement. So those are your heroes, brave scapegoaters.

    Illegal and immoral war, Patriot Acts (1 & 2), Military Commissions Act, torture, illegal wiretapping, rendition, Bankruptcy "reform", and other varied seminal destruction of our nation was the proof of Nader’s point. In a better nation he would be honored.

    Ah well, we are utterly in the arms of the Dems now, fellow citizens. The anti-Nader sneering by the intertube mob got us here, and there isn’t a way to turn back now. Let’s just hope the blog army will prove to matter.

    In any case I will never join in the ritual spitfest at a man who dedicated his life to bettering life for the Middle Class. A truly principled activist honors those who stand up for them, and doesn’t stab them in the back to ingratiate themselves with Established Power.

  36. 36
    mark says:

    When I was in the Army, a popular phrase was “F—- Up, Move Up,” because the people who screwed up always seemed to get promoted, while the ones who were right are either punished, ignored, or some combination of the two. I am glad to see this is the guiding principle for our government, too.

    it’s not just the government bub, if you don’t think corporate american works on the same principles you’re kidding yourself.

  37. 37

    […] Furthermore: The premiums were reduced in 1996 because the fund had reached its statutory reserve level. That wasn’t so much the problem. Everybody was happy. (Except the thrifts, which had by no means reached theirs—but that’s another story). The problem really came about five years later (2000/2001) when the FDIC realized that many changes in banking (such as increading levels of consolidation), plus inflation, had made that reserve level too low, and there was no way for them to change it. Also, newer banks, which themselves had never paid any premiums, were unfairly coasting on the previous premiums made by older banks. And many other complications with the system. That’s why in 2001 they lobbied congress for statutory authority to have flexible control over the reserve levels, to match the actual state of the banks. Congress did not make banks start paying premiums again until 2006. So, as Bair, puts it, “five years were wasted.” […]

  38. 38
    over_educated says:

    Over the past eight years, I’ve routinely derided people who were willing to trade freedom for security, and yet now I’m growing fairly comfortable with notion of trading due process for revenge.

  39. 39
    Cris says:

    @mark: it’s not just the government bub, if you don’t think corporate american works on the same principles you’re kidding yourself.

    I’ve worked in a corporate environment for eight years, and as a result there is no convincing me that the private sector is somehow superior to the public sector when it comes to bloated, inefficient bureaucracies. As far as I can see, the ownership model doesn’t matter; it’s the size of the organization.

  40. 40
    jerry 101 says:

    to quote myself in the comments thread on a recent post about tony blair at http://chasemeladies.blogspot.com/ . To toot my horn, I think it’s one of the most profound things I’ve ever written, in that it sums up the entire era of American insanity. I’d point to the election of Nixon as the approximate start of the Era.

    Anyway,

    This pretty much sums up what is wrong with the entire western world these days, not just what’s wrong with Tony Blair.
    Fuck shit up, get handed more and bigger shit to fuck up. Fuck that shit up, get more and bigger shit to fuck up. Fuck that shit up, and get handed even bigger shit to fuck up.
    All because Tony Blair and the others in charge of fucking shit up are very serious people who should be taken seriously. It doesn’t matter how many times they fail and fuck shit up.
    The people who watch the shit and try to say, "hey – he’s gonna fuck this shit up" are told to shut the fuck up and eat a cookie.
    Because they’re not serious, after all, they don’t want to fuck shit up. Serious people wear suits and fuck everyone’s shit up.

    It’s the theory of fucked up shit.

  41. 41
    gwangung says:

    Ralph Nader ran for President to have a chance to debate Bush and have some microphone-time. The man seemed to believe that Americans were not being given the truth about the sold-out Dems and that the Middle Class needed representation and a voice. The convenient lie was that Nader changed his spots and became an ego-maniac.

    That’s not a convenient lie. That’s the truth.

    He’s still an ass because he still cares more about himself than middle class Americans. IT’S NOT ENOUGH TO TELL THE TRUTH—you have to have concrete actions, plans to back it up and the organizational skills to pull those plans off.

    Nader doesn’t have the planning skills and he doesn’t have the organizational skills–and he doesn’t care enough to obtain them.

  42. 42
    Cpl. Cam says:

    Haha, fuck you guys. Ralph Nader didn’t fail you by running for President, you failed him (and us) by not voting him in.

Trackbacks & Pingbacks

  1. […] Furthermore: The premiums were reduced in 1996 because the fund had reached its statutory reserve level. That wasn’t so much the problem. Everybody was happy. (Except the thrifts, which had by no means reached theirs—but that’s another story). The problem really came about five years later (2000/2001) when the FDIC realized that many changes in banking (such as increading levels of consolidation), plus inflation, had made that reserve level too low, and there was no way for them to change it. Also, newer banks, which themselves had never paid any premiums, were unfairly coasting on the previous premiums made by older banks. And many other complications with the system. That’s why in 2001 they lobbied congress for statutory authority to have flexible control over the reserve levels, to match the actual state of the banks. Congress did not make banks start paying premiums again until 2006. So, as Bair, puts it, “five years were wasted.” […]

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