Login for Registered Members:
Register for Free
Post comments, receive updates via email, gain access to exclusive content, and more.
Spam Safe!
Register to read this report, or enroll now to access *all* Martenson Reports.
EmailSunday, August 16, 2009, 3:35 pm, by cmartenson
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 $15 billion in shaky assets on which the FDIC will share future losses do not turn into larger-than-expected losses.
Your faithful information scout,
Chris Martenson
Copyright 2009, Chris Martenson. All rights reserved.
Print
Comments
Dr. Martenson,
Do you know how Safe Deposit Boxes are handled by the FDIC in a takeover? More specifically, do you think it would be possible to access a safe deposit box if your bank was seized?
Thanks for the timely report.
All the Best...
Enroll today to read more.
I know there were a couple of bills introduced earlier this year to increase the FDIC's line of credit which was at "only" 30 billion.
Did any of these pass? It seems as though the FDIC has seen this coming for quite some time...
Enroll today to read more.
While it's possible that this banking crisis will be shallower and shorter than the S&L crisis, I consider it very unlikely. Assuming that this crisis began in 2007/08 and that it, too, will take eight years to peak, we might expect the FDIC to find itself increasingly busy through 2019, with a peak in 2015...
Enroll today to read more.
MarkM,
Yes, it was snuck in a different bill
*Enroll to see Link*
Here is the text
S. 896: Helping Families Save Their Homes Act of 2009
*Enroll to see Link*
*Enroll to see Link*
Website: How troubled is your bank or credit union?
The site also compares the troubled asset ratio from last year so you can see if rate is increasing or decreasing.
Track your bank here
*Enroll to see Link*
Track your credit union here
*Enroll to see Link*
Here is the link for the big Colonial Bank that closed this weekend
*Enroll to see Link*
Is it just me, or do:
a) Banks with failing loan portfolios will look everywhere to raise ca$h, including selling assets (so far, we know there is only 1 in the entire US without any bad loans)
b) Given (a), credit will be very tight, so won't any businesses that rely on bank loans also be looking to liquidate anything they can to stay in business?
c) Unemployed, close-to-unemployed, or worried-about-being-unemployed people buy as little as possible and also liquidate assets to try and raise cash
d) Don't a, b, and c pretty much mean there are going to be a whole lot of assets chasing a shrinking pool of available dollars and seal the deal for Deflation? Key word is "available" - Ben's printing press can print, but it cannot allocate dollars where they will be spent (that's why it is very likely Ben will keep pushing the PRINT button over and over and over again, kick the machine, curse, and throw things at it long after enough money has been printed - when those dollars do start kicking, he'll be drowning in them)
I thought I remembered them obtaining a 500 billion line of credit, but I couldn't bet on it. Thanks for the link. One more thing they sneaked past us. Like I said, the FDIC has seen this coming for a while. Buckle up.
Thank you for that Bluebird.
The bill text is below. It bears noting that this is merely a borrowing line for the FDIC and that whatever funds are used must be paid back at some point. Not that Congress won't simply change that rule too in the future, but as it stands the FDIC will have to raise whatever funds they borrow through their normal mechanism of charging premiums on bank assets...
Enroll today to read more.
Chris,
Thanks for another revealing report.
Would you mind posting a list of questions (and answers) you would ask a bank manager when evaluating their solidity? I imagine this information would be useful to a lot of members right about now...
Enroll today to read more.
Bluebird, that's a great link! Thanks for posting. I've been assuming my Navy Federal Credit Union was solid, as well as USAA Federal Savings Bank (thanks, Dad, for being a Marine!) But I was shocked to see that NFCU's troubled asset ratio is double the national average for credit unions!