FDIC Bank Failure Report - Late Edition

This week, the Federal Deposit Insurance Corporation closed three banks: Warren Bank of Warren, MI; Jennings State Bank of Spring Grove, MN; and Southern Colorado National Bank of Pueblo, CO. Total declared asset value of the closed banks was approximately $633,800,000, and total deposits were approximately $585,300,000. The cost to the FDIC is estimated at $293,300,000.

According to our methodology, the recoverable value of the three banks was $292,000,000, or only 46.07% of the declared asset value. This makes this week's closures distinctly below the cumulative recoverability since December, which stands at 57.44% (down from last week's 57.45%).

Cumulative cost-to-FDIC was brought to $45,998,100,000. This closure brings the total declared assets of FDIC-failed banks (since December of 2007) to $479,023,580,000, and total FDIC-insured deposits to $321,137,920,000. The recoverable value of all failed banks was only $275,139,820,000 (57.44% of the declared value).

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This week's closures were rather piddly, as you can see, with cumulative declared assets below $1 billion. Perhaps the insurance premium cheques got lost in the mail, so the board of directors had to 'pass the plate,' as it were. Frankly, we really don't see how these three little banks were the worst to be found in the U.S. bank system this week. The numbers, although bad, are not at the bottom... or the top, depending if your glass is half-empty or half-full.

We still stand by our concern that the FDIC is the proud owner of a Ponzi-style pyramid scheme, masquerading as deposit insurance. The recent news that the FDIC's forcing banks to pay ahead three years on their premiums is credence to this thought. Why, other than being desperate for liquid cash, would the FDIC force the ailing banking system to cough up around $45 billion in 'premiums?' The only scenario which makes any sense to us is that the FDIC is wholly dependent on its incoming premium payments to maintain a facade of its operations... such as this week's closures.

"In choosing this path, it should be clear to the public that the industry will not simply tap the shoulder of the increasingly weary taxpayer. This proposal is a vote of confidence for the banking industry's resilience, and it will continue to recover its strength as we work through the significant challenges ahead."

So said Sheila Bair, Chairwoman of the FDIC. We're not quite sure where she gets her ideas, as the U.S. Treasury extended the FDIC the $500 billion line of credit awhile back... perhaps she isn't aware that the Treasury plays with the weary taxpayer's money? And how is forcing banks to pay out three years' worth of premiums a vote of confidence, other than confidence that said banks are in deep trouble and the FDIC is out of money?

Ms. Bair makes no sense, in our humble opinion. We're beginning to think that she is, perhaps, just a pretty face (cough, cough), rather than the head honcho of a lean, mean, deposit-insurin' machine. But maybe that's just us.

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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 listed here. Only those States which have two or more closures are considered.

1. Georgia
2. Nevada
3. Illinois
4. Utah
5. Kansas
6. Minnesota (up from #7)
7. Oregon (down from #6)
8. Missouri
9. Colorado (new to list)
10. Washington (down from #9)

The recoverable value represents how much of declared assets are actually worth on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.

1. Florida (31.89%)
2. California (39.74%)
3. Colorado (42.76%)
4. Michigan (43.07%)
5. Nevada (50.13%)
6. Georgia (53.76%)
7. Utah (55.39%)
8. Arizona (56.08%)
9. Washington (56.18%)
10. North Carolina (56.7%)

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We find it interesting that Georgia, which is the worst-off State by number of closures, is actually only number six on the recoverable value list. Perhaps even more interesting is Florida's besting of California for king of the dung heap. This suggests several things to us:

First is perhaps obvious: Georgia is receiving undue punishment to its banking system, as it is no where near as insolvent as Florida's system. In fact, we will go on record here stating that Florida should have a banking holiday all its own, because it's just that special. Why Georgia is being singled out for a perhaps disproportionate number of failures is unclear to us, but we posit that it is likely politically-motivated; Georgia must have seriously pissed someone off. We can't imagine how or why.

Second is less so, and more subjective: California is getting a lot of press on its bullet-time collapse into fiscal doom, but perhaps the focus is misplaced. California's numbers were squewed by the terrific implosion of IndyMac, and removal of that bank leaves California's recoverable value at 59.49%. This would suggest that Florida is much, much deeper into financial trouble than California, but yet we haven't seen as much gnashing of teeth about how Florida is heading for a sovereign default. Hmmm... why that is, we really don't know, but we expect that Florida will probably have an 'unexpected rise' to the headlines when the State catastrophically implodes.