It has been long time since I sign back in and write something. In fact, I rather re-post someone comments on FDIC issue. Yes, it is scary to know FDIC is broke.
Off the wire this morning:
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 and intentionally misleading.
The result?
THE FDIC IS BROKE.
