Friday, May 29, 2009

The Anti-Dog-Eat-Dog Act

In an effort to boost reserve ratios at struggling banks, the FDIC has issued the Anti-Dog-Eat-Dog Act which will prevent banks from attracting depositor money.

U.S. banks that are struggling to stay afloat will not be allowed to aggressively ratchet up interest rates to attract customer money, a top bank regulator said on Friday.

The Federal Deposit Insurance Corp voted to bar a bank with insured deposits from paying interest rates that "significantly exceed" prevailing market rates if the bank is deemed not well capitalized. The new rule better defines what constitutes normal market rates, the FDIC said.

Seriously? This is straight out of Atlas Shrugged and will cause small banks who are looking for depositors to be forced into insolvency with their assets purchased by the currently insolvent big banks that basically own the FDIC. We've had a lot of customers complaining about the big banks completely railroading them with fees, rates, etc. and they are moving deposits to smaller relationship driven banks. The big banks can't compete on that.

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