Thursday, August 27, 2009

1,000 Banks to Fail In Next Two Years

If you're reading this blog (thank you), I don't have to tell you that the economy is far worse than they're telling us. But if you happen to live under a rock, or have your television permanently affixed to MTV, you have to ask yourself, how the economy can be improving while at the same time, one thousand banks are predicted to fail in the next 24 months.

Is your bank solvent? Absolutely not. Under a fractional reserve banking system, banks are inherently insolvent, because it's legal for them to loan out money they don't have. This is the purpose of the FDIC, and its moral hazard: you don't care if your bank is insolvent, because it's insured. And the real fraud of it is, they loan you money they created our of thin air in the first place, and then expect you to pay it back, at interest. But if enough of you default, does the bank wash its hands of the loan and move on without it? No, if you don't pay your loan, the bank goes under as well. Even though the money was created out of thin air. It's the height of insanity and criminality.

    CNBC -

    The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.

    “We’ve already lost 81 this year,” Kanas told CNBC. “The numbers are climbing every day. Many of these institutions nobody’s ever heard of. They're smaller companies.”

    Failed banks tend to be smaller and private, which exacerbates the problem for small business borrowers, said Kanas, who became CEO of BankUnited when his firm bought the bank and is the former chairman and CEO of North Fork bank.

    “Government money has propped up the very large institutions as a result of the stimulus package,” he said. “There’s really very little lifeline available for the small institutions that are suffering.”

    This comes at a time when the FDIC has established new rules on bank sales. Private equity, for instance, would have to hold double the capital of their competitors in order to buy such an institution, said Kanas.

    “This will have somewhat of a chilling effect on our participation,” he said. “As a result of having to keep higher capital levels, we’ll see lower prices coming from that sector.”

Read all of it...