Just another FDIC Friday

In what has become a Friday tradition, three (I posted this too soon) four more banks bite the dust.  MarketWatch.com has this story on today’s edition of  FDIC Friday.

(Added at 9:54pm ET – I posted the FDIC Friday story too soon.  MarketWatch hasn’t updated the story yet, but Pinnacle Bank in Beaverton OR was also closed today.  It’s on the FDIC website here.  According to the FDIC Pinnacle Bank had total assets of approximately $73 million and total deposits of $64 million.  The FDIC estimates that the cost to the Deposit Insurance Fund will be $12.1 million.  So add $12.1 million to the numbers below.)

Loup City, Neb.-based Sherman County Bank, Cape Coral, Fla.-based Riverside Bank of the Gulf Coast and Pittsfield, Ill.-based Corn Belt Bank and Trust Company were closed by regulators Friday, bringing the number of U.S. bank failures for 2009 to 12 and 37 total since the start of the credit crisis, the Federal Deposit Insurance Corp. said.

In reading the story, it appears that the FDIC is on the hook for about $28 million for Sherman County Bank, $201.5 million for Riverside Bank, and $100 million for Corn Belt Bank.  That’s $309.5 million this week.

Besides the fact that they do this on Friday so the markets can’t react to the news, another thing really bothers me about these bank failures.  It’s the way the FDIC categorizes the finacial situation of the failed banks.  Here’s a quote to help you understand what I mean: Nebraska’s Sherman County Bank had roughly $129.8 million in assets as of Feb. 12 and $85.1 million in deposits, the FDIC said.

If they really had $129.8 million in assets, and $85.1 million in deposits, why did they fail?

I guess my question is how they can be considered assets when they are actually liabilities?  Notice that every one of these failed banks actually show more “assets” on their books than deposits – and deposits are money that need to be paid back to depositors.  So why are they now broke and out of business?

The answer of course is that the “assets” are actually loans they made.  Many of which will never be repaid.  While the people who deposited money into these banks most assuredly want their money back.  And they’ll get it back via the FDIC – with tax dollars from us.

Well, the money is actually being printed out of thin air so we’re not paying for it yet, but we will.  The government has just stolen $309.5 million worth of our future production from us.  And hardly anyone even bothers to mention it.

We’ve become numb to these numbers, and no one really cares anymore because everyone knows we’re broke as a country.  The national debt (see the counter at the top of this page for the current total debt) will never be repaid.

The way I see it, the US Government has only two choices: Default on the debt or inflate it away.  Guess which one they’re doing?

Tune in right here next week for the next installment of FDIC Friday.  Until then, buy gold.


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