Interesting post from BullWinkle's board on IHUB.....
siliconinvestor.com
Posted by: CaribbeanJim
In reply to: roguedolphin who wrote msg# 27439
Date:3/6/2008 10:34:10 PM
Post #of 27440
otraque - Oh, and don't forget the FDIC that is probably grosely underfunded. A global financial tsunami where the centerpoint of the quake is the US could (most likely "will") create a Katrina-like FDIC meltdown.
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REPOSTED from someone on CBS Marketwatch:
I'm not sure where all of this confidence and faith in the FDIC comes from. Do you all realize that the FDIC has only $50 BILLION in funds insuring over $12 TRILLION in deposits? That ratio is 0.00417. Simply put, the FDIC has a tiny fraction of funds available to deal with saving depositors in failed banks.
The ENTIRE BANKING INDUSTRY IS ESSSENTIALLY BANKRUPT at this stage in terms of being short of regulatory capital requirements in the US. What we have is a MASSIVE SOLVENCY CRISIS IN THE BANKING SYSTEM. The Federal Reserve is dealing with this as a liquidity crisis, but it's a core solvency crisis. Since last August 2007, the ECB (European Central Bank) and the Federal Reserve, together have poured about $2 TRILLION into loans to the banking system in exchange for impaired to worthless collateral just to keep the banking system in the US and Europe from imploding. And that's before even a tiny fraction of the real ACTUAL LOSSES have been taken into account by the banks. Conservative estimates by UBS (Union Bank Switzerland) places these losses at around $600 BILLION and only about $120 BILLION have been accounted for so far.
It isn't the little local banks that are of very great concern. It's the huge money center banks that are the real issue as they are the ones that played the game of lending roulette and lost. The actual losses may be in the TRILLIONS OF DOLLARS. Banks like Citibank and Bank of America, the two largest in the US, are teetering on the brink of insolvency. In the case of Citibank, they have liabilities (deposits) of over $2.2 TRILLION and their assets to cover these are shrinking daily.
Even doubling the FDIC staff to 500 or so people isn't going to do much to deal with this massive BANK INSOLVENCY CRISIS. The FDIC doesn't have a tiny fraction of a penny on hand for each of the dollars in deposits it insures. Nobody should have any confidence whatsoever in the FDIC as its guarantee from a practical standpoint is worthless in real dollar terms. Oh, yeah, but it's backed by the US Government. Wow! I am so reassured that it's backed by the Federal government that has an almost $10 TRILLION NOMINAL AGGREGATE DEBT and $50+ TRILLION IN UNFUNDED LIABILITIES according to the GAO (Government Accountability Office).
But this is America and reality doesn't count anymore, so let's just all be wishful and repeat over and over that America is the richest country in the world and it's morning in America again...
We're not in a liquidity crisis, but a SOLVENCY crisis, and there seems no solution. |
