US banks unprepared for another global meltdown: FDIC

The head of the United States Federal Deposit Insurance Corp (FDIC), which insures US bank deposits, warned that US banks couldn’t withstand another global financial crisis, in a newly-found letter, dated November 2010.

“We remain concerned over their ability to withstand stress in an uncertain economic environment,” wrote Sheila Bair, the head of the FDIC, in the letter to the Federal Reserve.

In her letter, Blair urged the FDIC to delay any dividends or compensation increases until it could show that earnings were strong and assets sound. She said given the uncertainty of the markets, the FDIC “did not believe it is the right time to allow transactions that will weaken their capital and liquidity positions,” Blair wrote.

However, the US Federal Reserve ignored Blair’s concerns and allowed the biggest 19 banks to go ahead and pay $USD33 billion in dividends and bonuses.