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If Bair won’t do the right thing with the FDIC (and OTS/OCC), seizing banks when she should, it appears they will stop the BS games that they DO play when they come in:

When AmTrust Financial Corp. filed for bankruptcy protection this week, it may have been trying to avoid what happened to Washington Mutual last year.

Federal regulators seized WaMu in September 2008 and sold it to JPMorgan Chase, leaving WaMu shareholders without a dime. Never mind that WaMu’s parent company had $4 billion in the bank. Regulators took it all and gave it to JPMorgan.

Exactly.  These deposits, of course, are well beyond the FDIC insurance limits, and simply “disappear” when the FDIC comes-a-knocking.

But not if you file bankruptcy first!  Then you get to throw a padlock on the safe – before Sheila can come in there and rob your bank (almost literally.)

In all fairness if you’re over the FDIC maximum there’s really not a lot you can do about it.  Which is why you should never be, and why the Transaction Account guarantee program (now ending) has been such a big deal for businesses.

Try running a payroll for a business of any size without being over $250,000 in your account – ever.  Good luck. 

Sheila, I’m sure, will be pissed off about this – that’s a few million (and maybe tens of millions) she’s been “foreclosed” on being able to use to help cover what will, I’m sure, be huge FDIC losses if and when this bank is seized.

Of course if The FDIC had ever bothered with this silly law called “Prompt Corrective Action” – USC Title 12, Ch16, Sec 1831o - there would have never been a problem in the first place.  This bank, and the more than a hundred others thus far (and likely more than 2,000 to come) would have been seized before there was a risk of actual loss of materiality to the deposit insurance fund.

But Sheila has played “extend and pretend”, just like Treasury.  Unfortunately extending and pretending is really all about the pretending, and when the cash flow will no longer support the light bill, you’re done and the lies are exposed.

Any angst that Sheila has is the result of her own actions, and as a consequence I applaud boards that are willing to take this bull by the horns and shove it where Sheila won’t appreciate it.

Maybe – just maybe – it will wake up our regulators if done often enough to hurt, and cause them to start enforcing the law instead of willfully turning a blind eye to it.