For anyone foolish enough to think that our financial woes are over I tell you this, they have not yet begun... As of today the FDIC fund is $8.2 billion dollars in the negative... in other words, they actually have LESS than what they need to cover failures. To be fair, the only reason this is the case is because they've set aside $21.7 billion dollars to cover expected future bank failures, but it shows us a very ugly storm on the horizon.
We are likely going to see a commercial real estate bubble bursting soon... Small and medium banks made their gravy by giving out loans to businesses and people who had no business getting them, and soon their actions shall come home for the holidays. These community banks will have a difficult time staying afloat when multi-million dollar facilities go into default, and the ultimate result of that will be seizure of assets by the government.
Typically the FDIC would pay depositors their money, hand over the bank to someone else, and go their merry way, but it is difficult for me to see them doing that for the thousands of banks that could potentially fail if people started walking away from commercial mortgages. Bank failures *will* continue to increase in frequency, it's in the cards, and the FDIC knows it and has raised it's number of "Troubled Banks" from 416 in June to 552 today... These are not the glimmers of hope we were told of.
Am I telling you to take all your money out of the bank? No. But if you wanted to after this news, I wouldn't think you were crazy. A much saner option would be to store your money in a Credit Union (Yes, I'm going to beat that drum again, deal with it) as they do not use the FDIC.
Either way folks, buckle up, this ride's just getting started.
