Worse than I thought

Worse than I thought
I mentioned last week that I thought FDIC deposit insurance premiums would have to go up in the future to cover all of the losses the fund has incurred and will incur in the future as the financial system and its mess sorts itself out in the coming years. I think I understated the scope of the problem.

It was worst than I thought it was.

The Associated Press reported last week that the deposit insurance fund account balance was down to about USD$10.4 billion at the end of June. The FDIC is forecasting continuing costs of up to an additional USD$70 billion through 2013 resulting from the failures of the nation’s banks.

Last Friday’s three closures are estimated to cost the FDIC an additional $2 billion.

You don’t need Wall Street quant to tell you that this is not good. I can do the math in my head and see this is one of “woe shit” epiphany moments.

On the not so dull an bleak side of the picture, the FDIC does have a very large line of credit at the US Treasury and the Federal Reserve will not allow the FDIC to fail.

My small change in my local regional bank is safe unless the Government falls. I don’t think that will happen.

For those of you who might be conspiracy theorists, rent the film, SEVEN DAYS IN MAY, and then buy gold before you dive into your survival bunker somewhere in southern Utah or western Colorado.


Be well and stay happy.