From: &= nbsp; &nbs= p; = John (Jack) R. Venrick [jacksranch@skynetbb.com]

Sent: &= nbsp; &nbs= p; &= nbsp; Sunday, November 14, 2010 8:53 PM

To: &nb= sp; = &nb= sp; AJack R. Venrick

Subject: &nbs= p; &= nbsp; Banking Disaster Largely Ignored By Mainstream Media

----- Original Message -----

Sent: Monday, August 02, 2010 5:16 PM

Subject: Banking Disaster Largely Ignored By Mainstream Media

Banking Disaster Largely Ignored= By Mainstream Media

28 July 2010 <= /p>

By Greg Hunter http://usawatchdog.com/banking-disaster-largely-ignored-by-mains= tream-media/

USAWatchdog.com

Last week, bank failures quietly passed the 100 milestone for the year. I say “quietly” because the bank failure story has gone largely unreported or, at least, under-reported by the mainstream media. Just= to give you an idea of how fast the bank insolvency problem is accelerating, l= ast year, at this time, 64 banks had been taken over by the Federal Deposit Ins= urance Corporation. So far, this year, 103 banks have already been taken over by the FDIC. There is no question th= e bank failures the FDIC will have to deal with will be greater than the 140 insol= vent banks closed last year. At this point, we just don’t know how m= any more, but dozens more than last year for sure.

One big bank neg= ative I see is the loss of business in the Gulf because of the oil spill catastrophe. I don’t think it is a stretch to say that the loss of revenue from fishing, deep-water oil drilling, tourism and spoiled coastal property will probably have a negative effect on the balance sheet of Gulf Coast banks. Just 2 weeks ago, a Wall Street Journal st= ory documented tail spinning Florida banks asking for a break from federal regu= lators. It said, “Florida banks—already weakened by the real-estate bust and hit again by custo= mers suffering from the BP PLC oil spill—are asking federal regulators for= a reprieve from government-ordered capital raising as they struggle to stay alive.” (Click here for the more on the WSJ story.) The= re are currently 775 “problem” banks on the FDIC’s list, and I don’t think that list will be shrinking anytime soon.

In order for the= FDIC to close the banks, it has to spend cash to make depositors whole. It= is also entering into what are called “loss share” agreements.&nbs= p; It is a way to keep problem loans and foreclosed property in a banking envi= ronment and not become the full responsibility of the government. It also caps the loss for the buying institution. Here’s how the “loss share” basically works. The FDIC writes down the assets to an estimated value. Then, the FDIC covers any potential losses in an 80/20 split, with the FDIC covering 80% of any potential loss. These = loss share agreements were used in the S&L crisis in the early 90’s.&n= bsp; Since this crisis began, there have been $173.5 billion of loss share agreements through May of 2010. (The total now stands at more than $1= 78 billion.) According to FDIC spokesman David Barr, if loss share agreements were not used, the failed bank assets might sell for “pennies on the dollar.” The idea is to wait and sell the asset= s in the future when they might be worth more. Barr told me just last week, = “As the FDIC turns those losses into real losses when we sell those, then the l= oss at the failed bank is adjusted accordingly, some go up and some go down.= 221;

If the economy continues to tank, make no mistake, there will be some liability to the FDIC. We just will not know how much until the assets are sold. There might be no future liability at all, but I don’t think thatR= 17;s likely given the serious and prolonged problems facing the economy. T= his is probably a multi-billion dollar future write down, but who knows?

The bank closing= s are also taking a toll on the FDIC’s Deposit Insurance Fund, or DIF. = ; In May, it was reported to be $20.7 billion in the red. Back then, I wro= te a post called, “I talked with FDIC spokesman David Barr yesterday about the shortfall in the DIF. He sai= d, “The FDIC is not broke.” It has an additional “$63 billion in cash.” He told me there is about $46 billion in three years of prepaid deposit insurance premiums and an additional $17 billion in cash for a grand total of $63 billion in “liquid resources” to close insolvent banks.”

If you subtract = the $20.7 billion deficit of the DIF from the roughly $63 billion in “liquid resources,&= #8221; you end up with a little more than $42 billion. FDIC Chairman Sheila Bair was quoted, around the same time, saying the FDIC expects to spend ̶= 0;$40 billion” closing banks in the next year. (Remem= ber, this was before anyone knew how big the Gulf oil spill calamity was going to be.) My math says that would leave a little more than $2 billion in <= strong>“liquid resources.&= #8221; According to an email from David Barr yesterday, after that $2 billion= is used, there is a “. . . 100 billion line of credit (from the Treasury). The FDIC also ha= s some $35 billion in assets from failed banks that we must sell.”

That means in ab= out a year, the FDIC will be closing banks with borrowed money and what it can get from selling the assets of failed banks. If= that doesn’t paint a dire picture of bank insolvency in this country, I don’t know what does. It is amazing to me how little time the mainstream media is spending on this unfolding financial disaster and how m= uch time it is devoting to things like Mel Gibson’s rants.

Banking Disaster Largely Ignored= By Mainstream Media

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