So another bank, or set of banks failed. So what? There have been over 180 of them this year.This batch is different BECAUSE THE FDIC COULD NOT FIND A BUYER AT ANY PRICE for First Arizona Savings Bank. This bank was busted, but it did have performing assets. No one bought them. This is a fault line opening ...up, ...one of the "early warning signs" of fiscal doom warned about for years. The FDIC is also having problems finding buyers for busted banks in Illinois. This is truly a mark of impending problems for two reasons.
1. it reflects a deep pessimism and fear among the people who understand best how to make money by lending it to productive small businesses, the true steam engine that drives the economy. People are walking away from an income stream which is profitable BECAUSE THEY SEE DANGERS AHEAD. When people will not take risks, the engine seizes up.
2. the FDIC has cash reserves that are ALREADY NEGATIVE. The insurance fund that says your money is "fully insured by an agency of the Federal Goverment" is already in the red by over 15 billion. Its cash reserves were always ridiculously low, but it is completely tapped out. It is like State Farm Insurance, or Progressive, or Nationwide trying to tell you your property is fully insured with no cash assets. The insurance regulators would shut such a company down. Only governments are allowed to legally operate a Ponzi. Even a government run Ponzi, though, runs out of cash when the withdrawals get too heavy. The FDIC cannot afford to do on a large scale what it is doing for First Arizona, which is just write checks to the depositors. This means it is already VERY motivated to cut lucrative deals for the assets of these banks, and no one wants them.
This is very very bad, and a way better indicator of future economic activity than any government talking head you see on NBC nightly news.
The only good thing about this is that FAS is a small bank with only 280 million or so. If you see this happening on a larger scale, that means not a fault line, or a crack, but a full blown 17 on the Richter scale is in progress, and I hope you have withdrawn all the money you have in the bank, cause you ain't getting it out then.
As always, it is going to be the old and the poor who are hit hardest by this.
7 banks closed in Fla., Ga., Ill., Kan., Ariz. - Yahoo! Finance