No copypasta allowed unless you sign up on the site. Read it. Well worth the read, although years ago I watched FDIC on CSPAN admit they couldn't cover a major problem.

http://www.24hgold.com/english/contributor.aspx?contributor=Mish&article=2269690380G10020

Not surprisingly the rate of bank failures has increased during the last two years. Throughout the period 2000-2002 FDIC handled 17 banking failures with the majority (11) occurring during the recovery period in 2002. In 2008 and so far in 2009 FDIC has assisted some 90 banks through closure. The much larger number of failed banks can easily be explained by the type of recession we are currently facing compared with the tech-bubble.
On January 1st 2009 FDIC reported they had $17,276 million in their deposit insurance fund (DIF) and according to press releases for each failed bank, the estimated total costs for FDIC’s DIF during Q1 amounted to $2,146 million, leaving $14,997 million in the fund. However, according to the latest FDIC Quarterly report the fund counted $13,007 million at the start of Q2, thus a difference of $1,990 million. In other words the estimated spending on failed banks during Q1 was $2,147 million, but the bill ended up around $4,137 million instead (and probably still counting).
This is why Q2 is even more interesting, since the estimated costs are $11,504 million, thus leaving only $833 million in the fund for supporting failing banks in the future. Moreover the real total cost for Q109 turned out to be almost twice the amount of the estimates the second quarter showed. If that will be even close to reality for Q209 the FDIC’s DIF will (very) soon be out of funds completely.

We believe the main reason for this observation lies in a de facto relaxation of accounting
standards, even before the FASB 157 amendment on March 15th earlier this year. Basically the
relaxation allows banks to only write-off parts of their losses due to market impairment and they
may themselves decide a fair price that the asset could have been sold for during normal market
conditions to keep in their books. Allowing banks to control how they mark-to-market their assets,
will likely backfire and when they ultimately end up failing, imply greater closure costs for the
FDIC. From the graph above one can infer that the average yearly DIF costs/bank assets have
increased at an alarming rate to almost reach 31% in 2008 and 2009.
So, what does that imply? Basically it means that when valuating any U.S bank, their assets should
probably be marked down significantly relative to their book value, much because of how they
nowadays are allowed to manipulate their balance sheets in order to appear more solvent than
they in fact are.
E.g. if we look at the ten biggest banks in the U.S and assume conservatively that their accounting
standards are comparable to the most truthful 15% of banks that have failed under FDIC and we
sort on the 15th percentile, it would result in a $75.3 billion (10.78% of combined assets $698.53)
write-down. In other words, if banks would quit operating in their dream-world where accounting
standards obviously are next to absent and join the real world that would leave serious gaps in
their balance sheets of some $75.3 billion. For clarification, the 15th percentile of DIF costs/bank
assets equals 10.78%.
Below is a graph showing the DIF capital as a percentage of total bank deposits insured by the FDIC.
Note that this graph is based on the old insurance limit with a maximum coverage of
$100.000/account. This limit has been changed to cover up to $250.000/account until January 1st
2014. Estimates say that the change increases the deposits covered under FDIC insurance to
approximately $6 trillion in total.
*Banks are only included if the FDIC have reported both DIF costs and bank assets.

http://www.tradingfloor.com/EN/Documents/Research%20Note/2009-08-12%20Saxo%20Bank%20Research%20Note%20-%20FDIC%20DIF.pdf

A lot of banks are literally insolvent right now because of the under reporting of defaulted loans.

The last thing the gov/bankers want is the actual figures to be released. Luckily for them the MSM would never report something like that, so the masses can go on with their pointless lives.

How much longer can this economy be propped up with lies and misdirection?

How much longer can this economy be propped up with lies and misdirection?

Indefinitely. They've been doing it since 1933, after all.

If it crashes, it's because they wanted it to crash.

Bank Losses Drain Deposit Fund, F.D.I.C. Reports

By ERIC DASH
Published: August 27, 2009

Even though financial stocks have rallied nearly 70 percent since the end of March, the Federal Deposit Insurance Corporation issued another grim quarterly report Thursday on the health of the nation’s banks.

The agency reported that the banking industry lost $3.7 billion in the second quarter amid a surge in bad loans made to home builders, commercial real estate developers and small and midsize businesses. Its deposit insurance fund dropped 20 percent, to $10.4 billion, its lowest level in nearly 16 years. And the number of “problem banks” increased to 416, from 305 in the first quarter, and is expected to remain high.

Indeed, federal officials warned that while the economy and financial markets were showing signs of improvement, the banking sector was unlikely to rebound soon.

“These credit problems will at least outlast the recession by a couple of quarters,” said Sheila C. Bair, the F.D.I.C. chairwoman. “Cleaning up balance sheets is a painful process that does take time, but it is absolutely necessary to the industry’s sustained profitability.”

The dismal report shows how the industry’s problems have spread. A handful of the biggest banks were among the first to suffer big losses nearly two years ago from complex mortgage assets and other securities, but have posted strong trading profits in the last two quarters.

Still, most of the nation’s 8,195 banks primarily make their money from lending to consumers and businesses. They are now facing increased pressure from soaring loan losses and higher deposit insurance costs as the F.D.I.C. seeks to shore up the industry fund.

So far, 81 banks have failed this year, including 45 in the second quarter. That, in turn, has put enormous stress on the government’s deposit insurance fund, which is supported by fees charged to the banks regulated by the F.D.I.C. Its second-quarter reserve of $10.4 billion compares with $45.2 billion a year earlier.

Most of the decline comes from money that the agency has set aside to cover the cost of bank failures, and Ms. Bair said the fund had ample resources to cover all insured depositors.

But the levels are so low that F.D.I.C. officials said Thursday that they would consider imposing a special assessment on the banks, on top of elevated insurance fees, toward the end of the third quarter. Through similar actions, it added about $9.1 billion. It also will begin to recover some money by selling the assets of banks that it seized.

Ms. Bair said she did not anticipate having to immediately tap an emergency credit line run by the Treasury Department, although she did not rule it out. “I never say never,” she said. The F.D.I.C. quarterly report came after a similar release by the Office of Thrift Supervision on Wednesday that showed savings and loan associations eked out a $4 million profit, the first time the sector posted positive results since the fall of 2007. Still, the number of “problem thrifts” rose to 40, up from 17 a year earlier.

The savings and loan industry “is not out of the woods yet,” said John E. Bowman, the acting director of the office.

Federal banking regulators are bracing for hundreds of small and medium-size banks to collapse in the coming months. Banks are burdened with billions of dollars of bad loans made over the last few years and are continuing to set aside more money to cover losses. In fact, credit loss rates reached a record high in the second quarter.

Over all, banks charged off $48.9 billion, or 2.55 percent of assets, nearly twice the levels the industry reported last year.

http://www.nytimes.com/2009/08/28/business/28fdic.html?_r=1&em