WCV:
I have been following this story too. I agree with everything you wrote here.
You're on target about IMB except for the complaint about depositors getting their money back. People who deposit their money in banks are not wholly responsible for the risky assets on the bank's balance sheet. Taking a 50% haircut on cash that was earning around 5% is plenty of punishment for those depositors. Now of course if they were smart like my Greek relatives they'd never keep more than 100,000 in any one bank, but I think they'll be punished enough to learn this lesson.
Also, the FDIC does not currently hold any tax money; they collect insurance from every bank and so they have to pay up when someone defaults. Complaining that the FDIC has to cover a bank failure is like complaining that a hurricane insurance company has to pay out for hurricane damage. If the FDIC exhausts their reserves, there will be a debate in Congress about further funding. If you don't like your rep's stance on this issue, vote for someone else. But believe me, you'd rather see the FDIC help out depositors with taxpayer dollars than see the alternative (loss of confidence in the banking system, runs on banks, failure of more banks, inability to obtain mortgages or business loans for many Americans, decline in long-term growth).
The trouble with the FDIC is that by nature, it creates moral hazard. If you were a bank CEO, you realize that the Federal govt has your back. Thus, you can bet the ranch on risky mortgages all the while knowing that your depositors bear no risk. We all realize that the insurance company (FDIC) was not doing their due diligence on their policyholders.
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