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The FDIC Is Broke - Now What?

hypocritexposer

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The FDIC Is Broke - Now What?
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Monday, August 17, 2009, 5:13 pm, by cmartenson

This blog post is the most recent Martenson Report which I am now making available for wider distribution. I believe this needs to be read and understood by as many people as possible.

Sunday, August 16, 2009
Executive Summary

* With the most recent bank failures, the FDIC is out of funds.
* The FDIC is levying a one-time fee on member banks to cover the shortfall, but it will not be enough and it punishes the prudent.
* The FDIC has been suspiciously slow at shutting down banks that have admittedly already failed.
* Banks have been allowed to overestimate the actual worth of their assets using "mark-to-fantasy" accounting.
* Hundreds of banks are likely already mortally wounded and set to fail.
* The FDIC means well, but creates a moral hazard the effects of which now haunt us.
* Take prudent action: Choose only high-rated banks, and keep cash out of the bank.



Five more banks failed this week, resulting in a long weekend for the FDIC (see below). The largest of these, by far, was Colonial Bank, which will cost the FDIC some $2.8 billion. And that's assuming that their loss estimates pan out as expected and that the $15 billion in shaky assets on which the FDIC will share future losses do not turn into larger-than-expected losses.

SAN FRANCISCO (MarketWatch) -- Colonial BancGroup Inc. became the largest bank failure this year after the Federal Deposit Insurance Corporation seized the struggling Alabama-based lender Friday and sold it to BB&T Corp.

The Colonial BancGroup deal will knock roughly $2.8 billion off a pool of money, known as the Deposit Insurance Fund, which the FDIC maintains to guarantee bank customer deposits.

The FDIC and BB&T will share losses on $15 billion of Colonial's assets. Loss-sharing deals have become common since the financial crisis struck last year, as the FDIC tries to encourage more stable banks to take over failing institutions.

continued....

http://www.chrismartenson.com/blog/fdic-broke-now-what/25274
 
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