Posted by Daniel McCarthy on 11/26/09 12:12 AM   [Newer: The Curious World of Krugmanomics] [Older: Federalizing Thanksgiving]

Answer: very broke.  And not only that, but the Federal Deposit Insurance Corporation, the New Deal organ that we're assured will back up our bank deposits of up to $250,000, is itself overdrawn by $8.2 billion as the pace of bank failures quickens.

In reporting the story, the New York TImes  takes a minute to editorialize. Move along, nothing ot worry about here, says the Old Gray Lady:

Bank customers, however, should remain confident that their deposits would be protected since most of the amount reflects money that Federal Insurance Deposit Corporation has already set aside to cover the losses from future bank failures.

Notice the cagey wording -- "most" of the amount. Why not tell readers exactly how far in the red the FDIC is?  The banking environment that the actual news poritions of this article mentions certainly shouldn't inspire confidence:

the number of bank failures will probably keep climbing. So far, the F.D.I.C. has seized and sold 124 banks in 2009, and analysts expect hundreds more to collapse in the months ahead. That has put significant pressure on the F.D.I.C. fund, which posted a negative balance for the first time since 1992 when regulators cleaned up the carnage from hundreds of failed thrifts and other commercial lenders.

... The industry report card also showed how the banks’ troubles have spread. Two years ago, the problems seemed to be contained to a handful of big banks, which took large markdowns on the value of complex mortgage assets and other securities.

But as the big banks have regained their swagger from big trading profits over the last three quarters, the problems afflicting the bulk of the industry’s lenders — soured loans made to consumers and property developers — have grown considerably worse.

FDIC hopes to clamber out of its hole by ... taking out loans from the banks its meant to be insuring. "The agency recently approved plans calling for industry to lend money to the insurance fund by ordering banks to prepay annual assessments that would otherwise have been due through 2012." And if that doesn't work, there's always "an emergency credit line from the Treasury Department" -- in other words, just printing the money. It's easy to stay out of bankruptcy if you can counterfeit currency.

With a "recovery" like this, who needs a financial crisis? All told, it's another reason not to splurge on Black Friday -- which is more likely to be yet another red Friday for many businesses and banks.

Posted 11/27/09 1:44 PM BruceKoerber Cedar Rapids, IA

http://moneyandethics.blogspot.com/ Friday, November 27, 2009 Why Is Ethics An Important Foundation? It is not difficult to find a perfect example of the consequences of unethical practices. Fractional reserve banking is a type of fraud where only a portion of your bank deposit is actually held on to. The rest is lent out. Combine that with all of the shenanigans created in the financial markets by the ego-driven interventionists and all of the sudden the money lent out by the banks are then linked to the notorious toxic assets. But no need to worry!!! The FDIC which created a false sense of security to the depositors and to the banks themselves stands ready to - - - wait, what do you mean it is vastly overdrawn, and by definition, bankrupt and then some? The moral hazard of stimulating expansive and unethical practices, piled on top of the fraudulent fractional reserve practices constitutes a foundation made of not sand, but of quicksand! The simple solution is sound money (no fiat currency), and ethical practices (no fractional reserve banking and no government-backed ponzi schemes in the guise of insurance, ex. FDIC). The simple solution is to stop ego-driven interventionism which requires the extermination of the unConstitutional coup.