IS THE FEDERAL RESERVE BANKRUPT?
According to an article written by Bob Irish, Investment Director at Investor’s Daily Edge, the FDIC Deposit Insurance Fund started 2008 with $53 billion. By March 31st of this year it had dwindled to approximately $13 billion. But there have been 56 bank and savings and loan failures since then.
So how much money is left?!? A report published by Saxo Bank Research two days before recently failed banks of Colonial Bank and Community Bank of Nevada it was down to $648.1 million. Colonial is expected to take a $2.8 billion bite out of the fund. Community Bank of Nevada is expected to take $781 million chunk from the pie.
Do the math! This means the FDIC is technically bankrupt. However the FDIC chairman, Sheila Bair says there is nothing to worry about. “The FDIC’s guarantee is as certain as ever,” she says. “Our industry-funded reserves have covered all losses to date.”
Hmmmm?!?--- “Our industry-funded reserves have covered all losses to date.” Interesting statement she makes considering that in May Congress authorized the treasury to set aside $100 billion as a “backup insurance” fund for the FDIC. Even more interesting is that to the best of my knowledge, when the treasury sets aside money, this means it is being funded from the tax payer’s dollars.
If this is true, then the FDIC is guaranteeing our money in the banks for $250,000 as long as they can borrow the $250,000 from us tax payers! Bottom line, the FDIC is ONLY based and legitimate upon consumer confidence. The proof of this is in how banks are allowed to borrow money. They can lend up-to $10 on every $1 they actually have! So when they go belly up at the pace they are now nationwide, how are they to cover their losses when they are lending 90% of their money based upon a balance sheet on a $.03 piece of paper!
If you or I were to do lending similar to this, we would be sitting in a prison cell next to Madoff out east found guilty of a ponzy scheme. However if the banks do it, it’s called fractionalized banking and if the government does it, it’s called social security.