FDIC Broke and Selling Real Estate: How $13 Trillion in Assets is Protected by no Deposit Insurance Fund. FDIC Selling Properties to Replenish Fund and Collecting Early Fees.
The FDIC, that enigmatic seal of security on your bank entrance, is virtually bankrupt. The FDIC provides deposit insurance to over 8,000 banks that collectively hold $13 trillion in assets. We can question what those assets are really worth since many of these institutions hold $3 trillion in commercial real estate loans and defaulting residential properties. The big problem with the FDIC is that it is protecting institutions with assets the size of U.S. GDP with no money. The FDIC at this point is a giant paper tiger. If we look at the asset side of the equation, we will see that FDIC backed institutions are still claiming assets are worth bubble prices:
Commercial Real Estate Reality Check: 2007 Commercial Real Estate Valued at $6.5 Trillion with $3.5 trillion loans. Today, Commercial Real Estate Valued at $3.5 Trillion with $3.5 Trillion in Loans. Can you spot the Problem?
Commercial real estate is dealing with the neutron bomb effect. The buildings still stand but the inside is gutted as if vultures had devoured a carcass. What we are seeing, like in many other sectors of our economy, is a distinction between reality based economics and the inflated prices of Wall Street. If we look at the stock market, you wouldn’t know that people are lining up at Wal-Mart at midnight at the end of the month waiting for paychecks or government assistance to clear simply to buy food. You also wouldn’t know that 27 million people are either unemployed or underemployed. The irony of this is banks do know how bad the economy really is including the disaster that is commercial real estate. Banks are building up reserves to brace for what is going to be a long and hard road ahead.
10 States with Underemployment Rates of 20+ Percent. Manufacturing Sector Employs Same Number of Workers that we did in 1940.
The average American family must look at the current stock market rally as some kind of cruel joke. We have people anxiously waiting for government funds or paychecks to clear at the end of the month so they can wait outside of a Wal-Mart shopping center at midnight to buy food once their funds clear. We have nearly 36 million Americans on food stamps and another 27 million unemployed or underemployed. If this is the new recovery, many want very little to do with it.
Federal Government Budget Deficit in October is Three Times the Annual Budget Deficits of the Banana Republic of California.
California has been the poster child of ineffective state government. Bickering politicians, constant spending, and budget deficits that baffle the economic bottom line. But California isn’t alone in this spend more than you earn reality. Last year, California had to patch up $60 billion in budget deficits. A large and historical sum no doubt. Yet the federal government ran a $176 billion deficit in one month alone! In October the federal government brought in $135 billion in revenues (taxes) and spent $311 billion. This is not the kind of math you want to be seeing.