Thursday, September 17, 2009

The FDIC Is in Trouble

As we all know, the Federal Deposit Insurance Corporation (FDIC) guarantees depositors that they’ll get their money back if a bank fails, at least up to a certain amount. To fund its operations, the FDIC collects small fees from the banks that are held in reserve for the purpose of taking over troubled banks and paying off depositors.


Since the Great Depression, a period marked by widespread runs on banks, the FDIC has done a good job of fulfilling its mandate. So how are they doing in this crisis?

In a nutshell, they are in trouble.

The FDIC insures 8,246 institutions, with $13.5 trillion in assets. Not all of them are going bankrupt, of course. Yet as of late July, a disturbing 64 banks had gone belly up this year – the most since 1992 – costing the FDIC $12.5 billion. At the end of Q1, the agency was already asking for emergency funding.

And worse, much worse, is likely yet to come. The following chart shows the total assets on the books of the FDIC’s list of 305 troubled banks. The list doesn’t include the biggest banks that are considered too big to fail, as they are being separately supported with bailouts. By contrast, if the banks on this list fail, the FDIC is on the hook to have to step in and take them over and, of course, make depositors whole.

AssetsofInsuredProblemInstitutions
Other measures of how serious the losses at banks are becoming can be seen in the chart below, which shows charge-offs and non-current loans at all banks. You can see that the Net Charge-offs remain stubbornly high, with banks charging off almost $40 billion in bad loans in the last two quarters alone. And the number of non-current loans – loans where payments are not being kept up – is soaring.

Together, these measures indicate the potential for more big failures and more big bailouts coming down the pike.

BankProblemLoansApproaching100BAreDangerous

About Those Reserves…

Into the battle against bank insolvency the Fed brings a level of reserves that can best be described as paper-thin. From almost $60 billion last fall, the FDIC’s reserves have been drawn down to only about $13 billion today, a 16-year low. A quick look at the FDIC’s own data shows us how inadequate those reserves are compared to the deposits they are now insuring.

The chart below says it all:

DepositInsuranceFundReserveCoverageRatioIsInadequate

As you can see, the Federal Deposit Insurance Corporation currently covers each dollar on deposit with a trivial 2/10ths of a penny.

Read more here:
The FDIC Is in Trouble | EFAM | Escape From America Magazine

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NYSE Arca Morning Update - 08:30:00 ET

NYSE Arca Morning Update for Thursday, Sep 17, 2009 :

STOCKS TRADING ON NYSE Arca AT A PRICE 15% OR MORE AWAY FROM
THE PREVIOUS TRADE DAY'S CONSOLIDATED CLOSE PRICE (AS OF 08:30:00 ET)

Stock Wednesday's Close Current Price Pct Change Current NYSE ARCA Vol
IVAN $2.15 $2.80 30.1% 118,750
AMR $7.35 $9.02 22.7% 840,056


10 MOST ACTIVE STOCKS ON NYSE ARCA AS OF 08:30:00 ET

BASED ON DOLLARS TRADED: | BASED ON SHARES TRADED:
Stock $ Volume Price PctChg | Stock Share Vol Price PctChg
SPY $82,035,040 $107.29 ( 0.0%) | C 3,873,170 $4.29 2.2%
C $16,735,545 $4.29 2.2% | SNV 2,180,586 $3.98 (10.4%)
IWM $9,167,511 $61.85 0.1% | AMR 840,056 $9.02 22.7%
SNV $8,820,414 $3.98 (10.4%) | SPY 764,173 $107.29 ( 0.0%)
AMR $7,488,809 $9.02 22.7% | CVM 627,866 $1.40 6.9%
GLD $6,896,617 $99.73 ( 0.2%) | MGM 435,010 $13.04 5.3%
MGM $5,643,372 $13.04 5.3% | HYTM 372,035 $1.00 44.9%
GE $5,535,615 $17.15 1.1% | GE 322,502 $17.15 1.1%
BAC $5,535,383 $17.30 0.4% | BAC 320,372 $17.30 0.4%
AAPL $5,480,487 $182.68 0.4% | ETFC 235,160 $1.78 ( 1.3%)


Price changes may be affected by symbol splits and dividends.

Consolidated close price is the last print (excluding prints with trade
conditions) prior to 4PM ET.

This information is also updated on our web page every morning at 8:35ET:
http://www.tradearca.com/data/volume/daily_update.asp

This material is for informational purposes only.
NYSE Euronext and its affiliates ("NYSE Arca") are not soliciting any action based upon it.
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Copyright [2009] by NYSE Euronext. All rights reserved. Reproduction and redistribution prohibited without prior express consent.

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