|August 18, 2009|
Alabama regional lender, Colonial Bank, just became the 6th largest bank failure in U.S. history and the largest since Washington Mutual last year.
Regulators seized Colonial last Friday, selling the bank's deposits and assets to their competitor BB&T. Colonial was founded by real estate developer, Robert E. Lowder in 1981. The bank stayed true to its roots, right to the end (of the housing bubble).
The real question regarding the failure of Colonial, is what this will do to the Deposit Insurance Fund (DIF) maintained by the FDIC.
The FDIC Deposit Insurance Fund started 2008 with $53 billion. By March 31st of this year it had dwindled to approximately $13 billion. But there have been 56 bank and savings and loan failures since then. In fact, there were five bank failures last Friday.
But should you be worried about your deposits in the bank? After all, those deposits are "insured" up to $250,000… right?
We take issue with the notion of the government "insuring" bank deposits. It's nothing more than a confidence scam. It holds up only as long as the depositors have confidence in the system.
While the Deposit Insurance Fund may be temporarily depleted, the FDIC is unlikely to become truly bankrupt anytime soon…
In May, Congress authorized the Treasury to set aside $100 billion as a "backup insurance" fund for the FDIC. And they're going to need it. A Royal Bank of Canada report suggests that there will be "thousands" of bank failures in the U.S before this crisis is over.
While your bank deposits might relatively safe… the dollar is not.
When the speed of the printing press is the only limitation on money creation, the government will never run out of dollars to fund their programs – FDIC "insurance" included. But what about the value of those dollars?
If you need to purchase a decent amount of bullion, why pay the hefty premium most people pay to buy it? Steve McDonald has a better idea…
Whether coins or bars, most people pay a fat premium for physical gold. With these dealer markups, you would have to make a return of anywhere from 5% to 30% just to break even.
A buying opportunity… or the first major cracks in the rally?
Bank failures and lousy consumer confidence numbers on Friday, and another sell-off in the Asian markets contributed to the biggest decline in U.S. markets in more than a month. The Dow lost 186 points yesterday.
Even the "improving" employment numbers are no cause for celebration...
We are inherently distrustful of government statistics. The reporting is often manipulated and the results are notoriously skewed to fit the bias of the state. The inflation numbers are the most often cited, since the government removed food and fuel from the "core" inflation calculation.
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