FDIC proposes large banks pay for their risk

Classic locking the barn door after the horse has bolted. For starters, define risk. Risk, when hidden through OTC derivatives marked to model rather than market and/or off the balance transactions, cannot be defined. Also, paying for undefined or under defined risk in terms of fees will do little to curb risky activity if those fees do little to match the inherent risks. Furthermore, well defined risk in terms of full disclosure and fair market valuation would be discounted in share price. Share price and capital ratios will affect the ability of the entity to raise cash in the capital markets. Impede the ability to raise cash, and risky behavior will be squashed.

Maybe the FDIC needs cash. Risk fees will be passed on to their customers.

In creating the new scorecard for large bank fees, the FDIC said it used lessons from the recent crisis to determine which risk factors increase the chance an institution will fail.

Source: finance.yahoo.com