Posted: 05 Jun 2010 10:05 AM PDT
The FDIC went ahead and closed another handful of banks this Friday. It really is a rare day to see 400,000+ jobs added and the market retreat so significantly. A large part of the gains came from temporary Census hiring which peaked last month. If the economy were really recovering banks wouldn’t be failing on a continual basis. Part of the issue the FDIC has is the concentration of troubled assets in too big to fail banks. 105 banks hold 77 percent of all banking assets. The impression we have is the Federal Reserve and U.S. Treasury will do anything including destroying the U.S. dollar to keep these banks propped up. On the other hand, you have banks that are dealing with massive amounts of bad loans including commercial real estate loans and the FDIC deposit insurance fund is running in the negative.
First let us breakdown the U.S. banking system:
What is troubling is the massive concentration of banking wealth in a few hands. If we slice the 105 institutions further, we’ll find that roughly five banks have over half of all U.S. banking assets. When we talked about over 1,000 banks failing by the end of this economic crisis the number seems probably more shocking than the actual four figures would appear. Yet one too big to fail bank going under would wipe out the same amount as all these banks combined. The FDIC is simply cleaning house with the smaller banks yet the Federal Reserve and U.S. Treasury have practically promised unlimited access to the bigger banks to do as they see fit. There isn’t anything special about these banks. They have horrible balance sheets just like smaller banks:
3.42 percent of all assets at too big to fail banks are non-current. How much is this?
- $10.383 trillion x .0342 = $355 billion in non-current assets
The too big to fail currently have $355 billion in non-current assets yet somehow are turning out profits? When we see things like this we know something is inherently dysfunctional with the system. As the economy supposedly recovers FDIC troubled banks keep growing:
How can it be that banking problems are still growing while we are in a supposed economic recovery? What should be apparent is that the Federal Reserve and U.S. Treasury are working directly for the profit and success of the too big to fail banks. The banking system has done very little to help the real economy recover and why would they? It is their irresponsible years of lending that led us into this quagmire to begin with so expecting them to carry the flag forward is laughable.
Yet the too big to fail banks have the implicit guarantee from the Federal Reserve. Have you looked at a dollar bill recently? These are Federal Reserve Notes and this is the institutions shoveling money to the banking giants with horrible balance sheets:
As things get tough, people are now dipping into their savings funds to get by:
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