by Mish Shedlock, Mish Talk:
Customers with more than $250,000 in deposits are in trouble. Dear Fed, how about a safekeeping bank!?
False and Deceptive Records
On Friday, the Office of the Comptroller of the Currency (OCC) Closed the First National Bank of Lindsay Citing False and Deceptive Records
The First National Bank of Lindsay reopened on Monday as a branch of First Bank & Trust Co. of Duncan.
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Depositors of the failed bank automatically became depositors of First Bank & Trust Co., according to the FDIC. The insured deposits assumed by First Bank & Trust Co. will continue to be insured by the FDIC.
The FDIC estimates the failure of First National Bank of Lindsay will cost its Deposit Insurance Fund about $43 million.
The OCC said in a news release it acted after “identifying false and deceptive bank records and other information suggesting fraud that revealed depletion of the bank’s capital.”
The regulatory agency announced it also found that the First National Bank of Lindsay “was in an unsafe or unsound condition to transact business and that the bank’s assets were less than its obligations to its creditors and others.”
The OCC announced it also is referring the matter to the U.S. Department of Justice.
Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-866-314-1744 to set up an appointment to discuss their deposits.
The First National Bank of Lindsay is the second bank to fail in the nation this year, federal regulators announced. The last bank failure was Republic First Bank in Philadelphia on April 26. The last failure in Oklahoma — the Freedom State Bank in Freedom — was in 2014.
Over and Over
Over and over again, we keep proving the need for a safekeeping bank.
Q: What is a safekeeping bank?
A: A safekeeping bank is one with 100% reserves on deposits.
Musical Tribute
Contrary to popular myth, 100 percent reserves would not stop lending. Banks don’t lend deposits. Rather loans create deposits.
Fed “Playing With Fire” Take Two
In Fed “Playing With Fire” Take Two, Who Starts the Business Cycle? I discussed the need for a safekeeping bank.
My Six Recommendations
- Separate lending banks from deposit banks
- Eliminate the Fed’s ability to do QE
- Eliminate the Fed’s ability to monetize the debt
- Eliminate Fed’s ability to pay interest on reserves
- Audit the Fed
- Balanced Budget Constitutional Amendment requiring 2/3 vote in both houses to temporarily override
My proposal, and that of Irving Fisher in 1935 was to separate safekeeping (depository) banks from lending banks.
FDIC would be either unneeded or unlimited depending on how one views things because all deposits would be parked at the Fed and 100 percent available on demand.
Caitlin Long, CEO and founder of Custodia Bank, wants to create a deposit only bank and the Fed said on some spurious crypto-related charge.
In a long Twitter thread, Nic Carter discusses the Forced Closure of Silvergate Bank that also wanted to operate a safekeeping bank.
I speculate the Fed does not want competition from a safekeeping bank because it wants to force you at some later date into using its own allegedly safe Central Bank Digital currency.
