http://market-ticker.denninger.net/archives/1660-The-FDIC-Is-Broke.html http://www.chartmechanic.com/chart.jsp?c=demo/failedbanks.chart FDIC Deposit fund had negative $8.2B balance in Q3 That's broke. Bankrupt. Kaput. Gone. Poof. Dead. Rotting. A corpse. Yes, yes, I know, Treasury has their back. But let's not forget - The FDIC does not have a legal "full faith and credit" guarantee from the US Federal Government and Treasury. It has a "sense of Congress" resolution, but not a formal, legally-binding guarantee. I am not, by the way, predicting an actual FDIC failure to pay. Should such an event happen it would be tantamount to a declaration of revolutionary war (by the government about to be deposed!) as if there is one thing that would cause Granny to reach for her shotgun, it would be getting screwed out of her life savings after Sheila Bair and everyone else in our government has trotted out how their money is "fully safe" and that "nobody has ever lost a penny of insured deposits and never will" for more than 20 years, including lots of pronouncements of exactly that mantra over the last year. Nonetheless this outlines the underlying problem the FDIC has - it has willfully and intentionally ignored the fact that banks have mismarked their "assets" to overstate their values, it has refused to demand that accounting be done on a strict "mark to market" basis by bank examiners, and indeed, it has backed the "extend and pretend" commercial real estate "rollover" provisions of recent months, all of which is manifestly unsound, intentionally misleading, a consequence of willful refusal to enforce 12 USC Ch 16 Sec 1831o ("Prompt Corrective Action"), and has led to enormous losses being absorbed by the Deposit Insurance Fund that should have never happened. The result? THE FDIC IS BROKE. Let's put this in common-man terms: YOUR SO-CALLED "DEPOSIT INSURANCE" AND THE SEVERAL TRILLION IN CITIZEN BANK DEPOSITS ARE BACKED BY THE SAME AMOUNT OF CAPITAL THAT AIG HAD TO BACK THEIR CREDIT DEFAULT SWAPS: BUPKIS. Congratulations Sheila - is that your resignation I see in your hand or is that your promotion
So you're saying a government-backed enterprise gets to operate under it's own set of rules and that this ends up massively benefiting the politically powerful and creating the potential to screw everyone else. This is, in a word, shocking. Perhaps you should confine yourself to a mental institution. A state-run one, at that.
Actually, I'm just passing along something I located on another message board. But, I do like your satire wit.
