FDIC broke, now what?
Market Ticker's post on bank failures, the last bank failure, BankUnited, is costing the insurance $4.9 billion.
He mentions some of the outrageous things that happened seemingly with regulator knowledge and even encouragement and this is what got my attention:
"And, I might add, those scams cost the taxpayer essentially the entire contents of the FDIC's insurance fund."
I have been watching the deposits left in the FDIC as there is no question in my mind this insurance is as insolvent as many of the banks. I have said this before, but it seems to me the taxpayer bailout of financial institutions was more about ensuring that when you go to your bank you can get your money out. The banks loaned all deposits, and more, to people who are not paying it back and without the bailouts the banks simply did not have any money to keep the banking system operating and the FDIC simply could not cover the losses.
When I realised the degree of this financial crisis about 2.5 years ago I was wondering what someone like Warren Buffet would do with all his investor's money as such a great deal of it was in cash. It seemed to me that there simply was no place to keep that amount of cash safe.
I am speculating here, but it seems to me that his investment in Wells Fargo might be about keeping that cash safe. I have not evaluated the idea, it is just a thought.