The FDIC which technically supports the nation’s banking system is for all practical purposes insolvent. I’m not sure the magnitude of this problem has sunk into the psyche of the American public. The FDIC insures accounts at banks that include checking, saving, and CD accounts from a bank failure. This has occurred with regular frequency since the recession started 29 long months ago. Some 247 banks have failed since 2008 with a total asset base of $616 billion. The government has tried to calm the unsettled waters by raising the regular deposit coverage from $100,000 to $250,000 even though the FDIC deposit insurance fund is in the negative. This seems to have calmed the nerves of people since the days of long lines at IndyMac Bank in California but nothing has really changed at least at the core of the financial system. To the contrary things have worsened for the banking system.
The list of troubled banks continues to grow:
Source: Fortune, FDIC
This chart tells us that we should be gearing up for another round of bank failures. The increase of deposit insurance from $100,000 to $250,000 is largely a charade. 1 out of 3 Americans have absolutely no savings whatsoever. We have 17 percent unemployed or underemployed and another 20 to 25 percent working in the low paying service sector. Nearly 50 percent of Americans have nowhere close to $100,000 in liquid assets to insure, so increasing the insurance to $250,000 is merely a public relations move to show strength.