Thursday, February 26, 2009

The FDIC is a Joke

The FDIC released its Quarterly Banking Profile for the 4th Q of 2008 today:

The Deposit Insurance Fund has dwindled down to $18.9 billion.  Insured deposits total $4.8 trillion, so the reserve ratio is only 0.40% (WOW!).  Obviously, one significant bank failure can wipe out the rest of the fund.  This is why their credit line with the Treasury Department is so important.  By the way, the Treasury only borrows money since it is operating a budget deficit.  That means any draw on the credit line will have to be paid for by issuing Treasury securities.  YOU ARE INSURING YOUR OWN DEPOSITS AMERICA !!!!!!!!!!!!!!  The Fund has dropped by about $34 billion since the beginning of the 2nd Q of 2008.  Meanwhile, by some measures, deposit growth is occurring at its fastest clip in 10 years.

2008 ended with 25 bank failures, 5 assistance transactions and 252 "problem" institutions.  The identities of these "problem institutions" are never revealed by the FDIC, but I think that our Bad Banks list is a good proxy.  The assets of the problem children hit $159 billion.  So, if 11.89% of those problem assets go bust, the insurance fund is toast.

The Temporary Liquidity Guarantee Program (TLGP) backed $224 billion in corporate debt at year end 2008.  This program provides guarantees on the debt issued by bank holding companies (debt must meet certain criteria, maturity, etc.).  The FDIC collects a fee from the issuer for providing the guarantee.  The tally for 2008 was $3.44 billion.  Hmmm, 1.54% of the guaranteed principal up front.  I guess that looks good when you compare it to the Deposit Insurance Fund.

As for the banks themselves, they lost a combined $26.2 billion in the 4th quarter.  That was the worst quarterly performance in over 21 years.  Of note:

- goodwill & other intangibles dropped by $54 billion

- loans & leases 30-89 days past due increased by $36.9 billion

- non-current loans & leases increased by $44.1 billion

1 comment:

Anonymous said...

Very interesting post. Where can I find the numbers for the Temporary Liquidity Guarantee Program?