It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
The nonpartisan Congressional Budget Office and the White House's Office of Management and Budget are releasing new deficit projections Tuesday morning.
The good news expected from OMB: Apparently the federal deficit will be $1.58 trillion, instead of $1.8 trillion, for the fiscal year that ends Sept. 30.
The bad news: That's still really, really terrible. The worse news: Over the next 10 years, we thought the government was on track to spend $7.1 trillion more than it takes in. But now OMB thinks it's looking more like $9 trillion.
That would practically double the total U.S. debt, which stood at $11.7 trillion as of Friday (to watch the inexorable rise, check in once in a while at this Web site). Last month alone, the government paid $19.8 billion in interest on the national debt.
Unless Washington tackles a core problem: rising long-term costs of Social Security and Medicare, the experts see no significant improvement in the deficit picture, and ultimately, the economic picture.
Obama has promised to cut the deficit in half by the beginning of 2013. But doing so still leaves the United States with a deficit that year of around $650 billion, which many describe as "off the charts."
"America is just a few days away from a possible day of reckoning. I again call attention to this day, August 25, when the Federal Deposit Insurance Corporation issues its 2nd Quarter report for 2009 on the state of health of American banks.
There are roughly 8400 American banks that set aside a small portion of their profits to aggregately insure bank depositors should their local bank fail. A plethora of bank failures has depleted the FDIC reserve fund from $52.8 billion in 2008 to $13 billion in the 1st Quarter of 2009.
56 bank failures since March 31 have cost the FDIC an estimated $16 billion. (For comparison, in the 1st Quarter, bank failures only cost the FDIC $2.2 billion.) That $16 billion bank rescue would fully deplete the FDIC fund as it only had $13 billion at the close of the 1stQuarter."
So just how much liability does the FDIC bear aggregately for its "problem banks?"
At the end of the 1st Quarter in 2009 the FDIC said that figure was $220 billion. Remember now, the FDIC had only about $13 billion to over these institutions at the time.
How do American banks make profit today?
So how to American banks make any money today? In the recent past American banks derived most of their profits (45%) from residential and commercial property loans. These income sources are obviously crashing.
Banks valued by goodwill and bailout funds
So there, you can see that in addition to goodwill, the bank's capital was largely increased by bailout funds. So a dose of reality therapy will lead one to conclude that nearly all American banks are essentially insolvent.
If this leaves you feeling a bit queasy, well, you may need to reach for Dramamine when you realize the FDIC is not only broke, but it will probably announce it is tapping into its line of credit at the US Treasury Department, which is also insolvent (America is spending $1.58 trillion more than it collects in taxes this year).
How will American banks ever pay back the treasury while facing years of write-offs from home mortgages? The banks do not have sufficient profits to offset their losses.
Now if just a small portion of American bank depositors hear that the FDIC had to tap into the US Treasury for funds, and these depositors feel their banked money is at risk and want to withdraw some of it, the mother of all bank runs could ensue. This could create the day of reckoning that many have predicted.
A short banking holiday would have to be declared and who knows what happens from there – troops in the streets, issuance of new currency, martial law? Don’t think those in the Federal government haven’t made plans for such an occurrence.
One reality is that with the FDIC announcement of Guaranty Financial Group running onto the rocks, along with three others this week, the number of bank branches closed since IndyMac really got things going last year, is up to 3,610. Since this doesn't count the ATM's involved, nor does it count online banking use, a direct comparison the 1930's Depression (1) and the Second Depression (SD) may be elusive.