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The failure of some of the nation's largest banks in 2008, including Washington Mutual, Wachovia and IndyMac, and scores of smaller banks this year came at a price. The Federal Deposit Insurance Corporation's fund that insures the country's deposits now stands at $10.4 billion, down from $45.2 billion the prior year.
Jim Bianco, president of Bianco Research in Chicago doesn't believe depositors need worry, because the government has the power of the printing press to make good on FDIC insurance. But he is troubled. "As a taxpayer you should be concerned because this could be another potential drag and possibly a significant drag on the U.S. Treasury and bloat the already record federal deficit," he says, echoing a Wall Street Journal editorial on Tuesday, suggesting the FDIC may be the next entity in need of a bailout.
84 banks have failed this year, and the problem list of banks continues to grow, 416 as of the end of June. "They've got a bunch of huge open ended liabilities should the banking system continue to deteriorate and it could get ugly very, very fast for them," Bianco worries. As we learned during this banking crisis, these things can pick up steam in a hurry.
Originally posted by Sundancer
Great stuff as usual. Star and flag.
Does it make your brain hurt to try and figure out why the FDIC or anyone elses funds shrinking would worry us when the governnment will just hand them another big ol pile of the sweet smelling green stuff?
We've been handed piles too, but ours stick to the bottom of our shoes and don't smell so sweet.