Thursday, March 5, 2009

Systemic Bank Failures Looming

So, while the banking system is groaning under the weight of a collapsing housing market and economy, our federal government is going to add more weight to their backs to support the FDIC system. This is exactly like taxing the people more in order to stimulate the economy: totally ass-backwards.

So what happens later this year when the FDIC goes broke? If you are not preparing for that eventuality, you should be. You think 2009 is looking bad. In 2010, you will look back to now as the good times. Prepare yourself now by getting involved in a local currency, and encouraging your state to set up its own public bank. IF we can get the alternative infrastructure in place before the collapse, collateral damage can be limited. Otherwise, if the collapse happens with no contingency plans in place, the forecast is dark, very dark.

The US government is warning banks that its deposit insurance fund could go broke this year as bank failures mount.
The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC's plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.
Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protect.
"Without these assessments, the deposit insurance fund could become insolvent this year," Bair wrote.
The FDIC chief said in the letter that the rapidly deteriorating economic conditions raised the prospects of "a large number" of bank failures through 2010.
"Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative," she wrote.
The FDIC last Friday announced it would impose a temporary emergency fee on lenders and raise its regular assessments to shore up the rapidly depleting deposit insurance fund that insures individual customer deposits up to 250,000 dollars.
A week ago the FDIC reported a sharp depletion of the deposit insurance fund in the fourth quarter due to actual and anticipated bank failures, to 19 billion dollars from 34.6 billion in the third quarter.
The FDIC said it had set aside an additional 22 billion dollars for estimated losses on failures anticipated in 2009.

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