muses of the moment

March 18, 2009

Safe Banks Get Spanked by FDIC

Filed under: Bailout Nation, Credit Derivatives, FDIC, Odds 'n ends, Safe banks, The Banking Crisis, The Financial Crisis — totallygroovygirlfriday @ 7:11 pm

Ran across this article today and wondered if I was in the Twilight Zone….

FDIC Criticizes Massachusetts Bank for No Bad Loans

The FDIC is apparently upset at East Bridegwater Savings Bank because it doesn’t have enough toxic debt on its balance sheet. Chief executive Joseph Petrucelli said,  “We’re paranoid about credit quality.”

I really wish the rest of the financial system was paranoid.

The FDIC sited the bank with a “needs to improve” rating. Personally I think we should all flock to East Bridgewater with cash in hand for deposit.

From the article:

The problem, according to FDIC data, was that from late 2003 through mid-2008, East Bridgewater Savings made an average of 28 cents in loans for every dollar in deposit — a sharp contrast to the 90 percent average loan-to-deposit ratio among similar banks, the paper (Boston Business Journal) reported.

Fractional banking at 90% ratio is not a law, it is just the limit the government sets for banks at a given moment. Thank goodness one bank had the good sense and education of the financial markets not to take the government’s suggestion on how to run its business.

So ironic that good banking is being spanked and bad banking is being bailed out. Twilight Zone.

Shame on the FDIC.

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