Scaremongering nonsense, it has a $500 billion line of credit from the US treasury. No depositor has lost and no depositor is going to lose one dime in any of it.
"solvent banks already took a huge hit on increases in their FDIC insurance"
Hardly, the increase was 15 basis points, while their net interest margins are over 20 times that. Short term interest rates being a quarter point lower has a bigger effect on bank profitability.
"The number of mortgates that are "under water" continues to increase"
Mortgages issued in 2005 and earlier have loss rates under 1% still. Only the 2006 and 2007 vintages have any serious problems, and loss rates on all loans are running around 2%. No category of loans has loss rates equally the interest charged on them, besides the original epicenter of subprimes, which have long since been written off to insignificant levels.
All of the losses the major banks have booked since the summer of 2007 have been non-cash losses, from additions to loan loss reserves and marking traded securities to lower market prices. Their actual losses charged off have been under their net interest earned throughout. High loss provisions were necessary certainly, and they needed to rebuild their capital. But since the bond market began recovering around the turn of the year they have been doing so. All that mark to market stuff has been running in reverse for their corporate loans.
This was predictable, and it was predicted, by me among others. I told everyone who'd listen including on this site that the Fed's actions would cure the bond market, and that as soon as it moved up the banks would show profits again. Which they dutifully did - they just didn't have quarterly earnings showing such upticks until announcing their first quarter results in early April. Not coincidentally, the market thereupon took off like a rocket.
"unemployment numbers keep going up."
Lagging indicator, 6 months behind at every single turn in the economy, and already visibly topping.
"Huge amounts of the TARP money appears to have been "invested" in uncollectible debt."
$135 billion of the stuff lent to banks have already been repaid, plus $7 billion in dividends. The Citigroup stake, about a third of the remainder still out, has a $13 billion profit after converting into common near the panic lows. The other remaining large credits are Bank of America and Wells Fargo and both are money-good.
The only obviously uncollectable stuff is the UAW giveaways to the autos, and the amounts there are smaller. The treasury might lose $50 billion on them. AIG it isn't obvious either way, but conceivably there could be a loss that big, or nothing. The mortgage agencies had $400 billion set aside to cover them, but have only drawn $75 billion of it, and their loss reserves grew that much. They will earn it out, only a matter of how long it takes. The treasury will earn in the meantime marginally more than it pays on its own debt.
None of the small banks that might actually fail matter a tinkers darn. Just not enough money involved for any of them, they are there purely for political pressure and fairness reasons.
"looks like a situation that could very easily end in bankruptcy"
The treasury pays under 4% for money and men are lined up 3 deep all around the globe to lend to them, to the tune of $1.5 trillion in just the first 8 months of the year. Know a lot of bankrupts who can say that? It is an absurb concern.
Scaremongering nonsense, it has a $500 billion line of credit from the US treasury. No depositor has lost and no depositor is going to lose one dime in any of it.
When I said "the FDIC is out of money" I meant "the FDIC is out of money", not "the US treasury is out of money". If they borrow the money from the treasury it still has to be paid back, supposedly by the banks, with interest, in the form of either higher premiums or more "one time surcharges" or whatever they're calling them.