The Shotgun Wedding Planner on Wall Street!
Subsequent to my post couple of weeks back on the subject of Universal Banks, rapidly unfolding events in the US have catapulted JP Morgan Chase, Citi and Bank of America as the top 3 banking institutions in the country. With a leadership position across business parameters like Branch network, Deposit base, Credit Cards issued and hmm, Mortgages originated and serviced, these Banks carry an onerous responsibility on their balance sheets now and cover almost the entire US population in their collective footprint!
The unsung hero of all the hectic parleys that culminated in the Universal Bank proposition is the FDIC! This venerable 75 year old institution, a by product of the Depression-era legislation, has played a critical catalyst role in averting a banking crisis for the person on the street. While the more high profile Treasury and Federal Reserve arms of the Government have been publicly making attempts to get consensus on the bail out proposition, the FDIC has been proactively working behind the scenes to identify fissures in the banking system and diligently negotiating with the larger banks to take over their weaker brethren in what the market terms as "shotgun weddings"!
Bank failures can be very expensive, apart from causing an irreparable crisis of confidence in the economy; the ripple effects can cause immense stress to small businesses and individuals, by putting their lifetime earnings at risk!
Read more about the FDICs round-the-clock efforts (and the final 4 am Monday morning deal!) in the most recent Citi - Wachovia merger here.
And do you realize that, in this deal, there is already an implicit bail out package? The Federal Government, through the FDIC has agreed to absorb any losses beyond $42 Bn in Wachovia's $312 Bn asset portfolio, in return for preference shares in Citi. So much for the "noise" around bail outs!
