FDIC Bank Failure Report

This week, the Federal Deposit Insurance Corporation closed only one bank: Georgian Bank of Atlanta, Georgia. Total declared asset value of the closed bank was approximately $2,000,000,000, and total deposits were approximately $2,000,000,000. The cost to the FDIC is estimated at $892,000,000. According to our methodology, the recoverable value of Georgian Bank was $1,108,000,000, or only 55.40% of the declared asset value.

Cumulative cost-to-FDIC was brought to $45,704,800,000. This closure brings the total declared assets of FDIC-failed banks (since December of 2007) to $478,389,780,000, and total FDIC-insured deposits to $320,552,620,000. This includes the assets and deposits of Washington Mutual, which can now be included in data analysis due to our new methodology. The recoverable value of all failed banks was only $274,847,820,000, or 57.45% of the declared value.

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This week's closure was below the national average of failed banks, but it is far from attractive. Such a low recoverable value is a sign of some serious problems within the U.S. banking system; problems which have not, by any stretch of the imagination, been worked out or 'TARPed' from existence.

Since there is a distinct likelihood that a good chunk of the banking system is overvalued to about this degree (e.g. 55% recoverability or so), we can only assume that the FDIC is purposefully dragging its feet on closing those banks which are in the worst shape. This would make sense, especially considering if approximately half of the entire banking system's assets are toxic waste!

Given that scenario, though, a serious problem arises: it means that the FDIC's exhaulted insurance is nothing but a Ponzi scheme. If indeed the banking system is that insolvent, or even approxmiately that insolvent, then the money paid out on FDIC closures is simply the money which has been recently paid in by banks for the deposit insurance. Perhaps the FDIC chooses which bank to close, not based on how insolvent or zombiod it is, but rather how much money is on hand to cover deposits...

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On the basis of the ratio of bank closures to population (i.e. simply the number of failures in the State, with no account of assets or deposits), the ten most afflicted states are:

1. Georgia
2. Nevada
3. Illinois
4. Utah
5. Kansas
6. Oregon
7. Minnesota
8. Missouri
9. Washington
10. Florida

We are replacing the losses-to-assets analysis by State, with a recoverable value analysis by State. However, we are still retooling our data, but we expect that we will be ready to provide this analysis with next week's closures.