Late today, the FDIC seized IndyMac. Not surprising – but I am seeing some really ominous numbers. The FDIC statement – issued after the markets closed yesterday – said that their preliminary estimate of the FDIC cost was $4 to $8 billion. About $1 billion of IndyMac deposits were uninsured and will be lost, affecting about 10,000 customers.
But now for the really troubling data: the FDIC’s total insurance fund is less than $60 billion. If IndyMac ends up costing $6 billion, that’s more than ten percent of the FDIC’s total insurance fund that’s been wiped out with a single collapse.
Yet, the FDIC “insures” more than eight thousand banks with about $7 trillion in deposits. The top 150 banks have total assets of at least $20 billion each and deposits exceeding $2 billion each.
I just don’t see how this can end well.