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Up Scope! FDIC's DIF Slips (Not So) Quietly Beneath the Waves
For the first time since 1992, the Deposit Insurance Fund of the FDIC is showing a negative balance. Luckily, Chairwoman Bair can borrow another $94 billion from the Treasury before it never runs out of money, ever hits the debt ceiling. Hurry Shelia!
The Deposit Insurance Fund (DIF) decreased by $18.6 billion during the third quarter to a negative $8.2 billion (unaudited) primarily because of $21.7 billion in additional provisions for bank failures. Also, unrealized losses on available-for-sale securities, combined with operating expenses, reduced the fund by $1.1 billion. Accrued assessment income added $3.0 billion to the fund during the quarter, and interest earned, combined with realized gains from sale of securities and surcharges from the Temporary Liquidity Guarantee Program, added $1.2 billion.
[...]
The DIF’s reserve ratio was negative 0.16 percent on September 30, 2009, down from 0.22 percent on June 30, 2009, and 0.76 percent one year ago. The September 30, 2009, reserve ratio is the lowest reserve ratio for a combined bank and thrift insurance fund since June 30, 1992, when the ratio was negative 0.20 percent.
Ouch.
More alarmingly, the massive spike in deposits ($491 billion in a single quarter) and total assets at problem institutions popped up $200 billionish in nine short months- exactly while the reserve ratio drops like a Cardiff girl's petticoat after 2am. (Guess the videos had the intended effect).
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Another symptom of the diseased patient or will this actually matter? The whole house of cards is backed by the printing press. Do numbers like this actually bring us to a breaking point?
This is like standing on shore and doing nothing while a man 200 yards out is slowly drowning in front of your eyes. Why are you doing nothing? Because the powers that be are telling you everything is good and the man will be saved....eventually. So you wait and wait and wait until finally the man goes down for the last time.
Glub glub gasp urrp swallow glub last gasp arrgh............... silence.
...or you can't swim and wouldn't be able to save him anyway and know that it is inevtiable he will drown and you are incapable, can't do a single thing about it. If you try,
you perish as well.
Believe it's called the horns of a dilemna.
But what if in this case you have a table set up and a sign that you can carry with "Everything is fine, keep drowing, we are here and we GUARANTEE it will be all good"
And to make the picture full - you have the entire ZH team by the shore, ready and fit for swimming and screaming about your man drawning and you tell em - its ok guys we know what we are doing, just wait a bit more ...
Banco Festiva!!!! Be ready.
Remember- there are still additional liabilities due to all the loss sharing agreements in place with banks that acquired the failed slop from FDIC. Race to the bottom...
I'm feeling like a new Shiela confidence video about now, maybe halfway in she could segue to a ShamWow plug.
" Rising securities values boost equity capital ".
An obvious reason why the boyz must continue to bid up the zombies. Fundamentals be damned.
These new deposits are just the proceeds from the purchase transactions by the Fed of MBS and Treasuries (100's of billions) using new reserves, so not much to worry about folks, try not to over think it...it's just an accounting exercise.
when I was young, I thought money just came out of the wall when you needed it. All you needed was a plastic card that only grown ups got.
after that, I grew up and realized that was not the case...
until now... It seems not everybody grew up if you keep reading stuff like that.
I'm becoming rather dazed by all this. I tend to think that the inevitability of massive printing and mass inflation to hyperinflation is starting to make all this irrelevant. If you own tangible assets, you'll be good. If you're stuffing cash in a mattress, I guess you'll have a couple weeks of toilet paper when the "fun" starts.
Something has to give here Marla. A spike in deposits that are insured by an organization that cannot afford to cover the losses!?
People don't want to buy gold? They'd rather put the cash in the bank? LoL.
"Suze said everything was going to be fine, then I lost everything!".
"...insured by an organization that cannot afford to cover the losses!?".
Hmmm. Sounds alot like AIG.
what am i missing? isn't the reserve ratio an inverse product of the deposits? so you would expect the ratio to go down as deposits go up?
Ah, but that also works for negative ratios. Attract more deposits, show a smaller negative ratio. Nice trick.
I still don't know what a negative reserve is. I'm a layman...it hurts my brain.
Does it simply mean the FDIC 'owes' money from its Deposit Insurance reserve fund? Does it owe that money to the Treasury?
And the negative ratio...it's nearly meaningless.
It's mind-boggling.
Looks like its time for an upgrade to the Xanax Sheila, maybe wash it down with a little slug of brandy!
Another interesting point in the report on page 11 of 26 on pdf file:
Look under Fair Value of Derivative Contracts ::
FV of Interest Rate Contracts increases from 27.3 billion to 123.7 billion yoy.
"... it never runs out of money, ever hits the debt ceiling."
...this is gold medal wordsmithing. brilliance, Marla, brilliance.
Your brutal frankness is a magnet for those of us who appreciate the truth.
edit....i don't know why the strikethrough disappears.........
What i really want to see is the ledger of deposits that the fdic has been taking in. I've read but cann't confirm that banks are not paying or only paying a small percentage of their insurance?
any of you read this nice piece of fiction?
http://johngaltfla.com/blog3/2009/11/18/the-day-the-dollar-died/
I did...for those of you who are having a difficult time imagining what a dollar collapse might look like in real life, this is a good read.
The FDIC did not notice that backstopping the banking world went from,
Cozy warm easy subsidized bank yield planet,
to
Derivative death star of destruction.
You may want to amend your insurance underwriting fees.
Mark Beck
I don't even know what a negative reserve is. I need more coffee.
Dear Uncle Ben,
I see the FDIC is out of money and the Tiny Tim can't borrow more, well legally anyway (wink, wink). So Ben when are you going to bail her out? Come on Ben it's only a few billion! Just smash your fist on the number pad on the keyboard a few times and the problem is solved. Does it make you happy that you are cutting years off Sheila's life? Ben she is having to make really bad commercials, which is making us all look bad...what do you want from her to do? A strip tease on the tonight show, would that make you happy? Just bail her out like you will bail everyone else...speaking of I've been meaning to talk to about my MBS portfolio. Please call me, I need you Ben!
Love Random Banker
"Money printing. So easy a caveman can do it!"
oh god. anything but the strip tease. what is that, extortion?
This is exactly what Ben has been doing by buying up all those toxic MBSs and upping the "excess" reserves. Those "excess" reserves are just FDIC insurance by another name. If reserve requirement were adjusted to reflect the new credit risks in the economy, those would just become regular reserves.
The huge influx of deposits at banks shows clearly that Americans are starting to hoard cash across the board (and clearly, not buying gold); when that hoard meets declining industrial production, the dam will break and the dollar will take the hit; the only respite may be a clamp down on withdrawals in a desperate attempt to contain velocity, a la Argentina. And we know how well that worked out...