63 US "Problem Banks" Are Nearly Insolvent, But You Can't Know Which Ones

The FDIC recently released their quarterly report with some disturbing news: they have a list of "problem banks" that are "near insolvency."  These banks are in trouble because of unrealized losses on securities ballooned from $39 billion to $517 billion.

In a quarter.

Not year over year. Not over a decade. Over a course of three months.

That's an absolutely shocking increase. Residential mortgage-backed securities are the brunt of the problem. Sound familiar? Remember the subprime mortgage crisis of 2008? When everything went to heck, it was over around a trillion dollars in mortgage-backed securities that caused the bubble to burst. We just went from sort of okay to half a trillion in three months.

This is a really big deal.

Which "problem banks" are in trouble?

This is where it gets sticky.

We don't get to know which banks are in trouble.

It could be my bank. It could be yours. Or maybe it's not.

Are they big banks? Small ones?

The list is confidential to inhibit the likelihood of bank runs finishing off these institutions.

So we just don't know.

What we do know is that the FDIC has the funds to replace 1.17% of the qualified deposits in America. If your bank goes first, you'll get your money back after months of waiting. If your bank is further down the line?

Good luck.

We watched this happen with several banks last year, when only 12 were on the brink. Now there are 63.

Things are rough in the US economy, and the FDIC seems to be making plans to handle further collapse. How? By helping themselves to YOUR money that you have on deposit, safely (you thought) tucked away in your bank account.

If I'm right, a lot of people are going to be financially devastated in the not-so-distant future.

Think I'm a crazy conspiracy theorist? Well, as we've seen, that often means you're just ahead of the game. There are several reasons that I believe it may come to this, not the least of which is that there's a publicly accessible video of their meeting in which they discuss how to do it, when to do it, and how to keep the public from freaking out about it. 

Let's take a closer look.

What's the FDIC?

FDIC stands for Federal Deposit Insurance Corporation. From their website, we find what that means:

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation's financial system. To accomplish this mission, the FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.

They go on to say:

Since its creation in 1933, the FDIC has been an essential part of the American financial system. In the 1920s and early 1930s, a rise in bank failures created a national crisis, wiping out many Americans' savings. Since FDIC insurance began in 1934, no depositor has lost a single penny of insured funds due to bank failure.

Sounds great, right? It is when it works properly.

Depositors do not need to apply for FDIC insurance. Coverage is automatic whenever a deposit account is opened at an FDIC-insured bank or financial institution. If you are interested in FDIC deposit insurance coverage, simply make sure you are placing your funds in a deposit product at the bank.

The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

The FDIC provides separate coverage for deposits held in different account ownership categories. Depositors may qualify for coverage over $250,000 if they have funds in different ownership categories and all FDIC requirements are met.

All deposits that an accountholder has in the same ownership category at the same bank are added together and insured up to the standard insurance amount.

If the bank fails, FDIC covers the balance of a depositor's account up to the insurance limit.

So we know how it's supposed to work, and how it's worked up until now.

Our wealth and risk are dangerously concentrated.

Quick history: Back in the early 90s, there were 37 major banks in the US. That number is now down to four:

- Citigroup

- JP Morgan

- Bank of America

- Wells Fargo

This concentrates the wealth, and it also concentrates the risk. If one of the Big Four goes down, we all go down with it.

And all of this risk? It's being done with YOUR money. And it's all legal. Remember 2008? Nobody went to jail for that catastrophe that literally ruined the lives of tens of thousands of hardworking people. Those in charge, the ones who chose the risks to take, laughed all the way to their tax shelters in the Cayman Islands. And nobody will be held to account this time, either.

Why?

Because what they're doing is legal. It was all legalized by our Congress. You know, the folks who are supposed to represent our best interests.

Incidentally, this isn't just an American issue. It's global, too.

Only half the money on deposit is insured by the FDIC.

But why should we worry? Our money is insured, right?

Well, some of it.

According to the FDICs own numbers:

- 4,780 banks and savings and loans business are FDIC-insured

- The insured institutions have 23.8 trillion in assets.

- $18.1 trillion of those assets are deposits.

- $9.9 of that 18.1 is FDIC-insured.

- $8.2 trillion is not insured.

The rest of it falls above that $250,000 threshold for the insurance. Trillions of dollars of customer deposits are uninsured, and what's more, the insurance fund itself is sorely lacking.

All that money is available for a bail-in.

Simply put, that means the money could be used for a bank bail-in if things go sideways.

If you think I'm crazy, you don't have to go very far back in history to see exactly that happening. Greece came within days in 2015 of having all accounts with €8,000 Euro or more "trimmed" by 30%, euphemistically calling it a "haircut." The Bank of Portugal funded bail-ins of "senior bondholders" with deposit accounts in 2016. 

And nearly everyone who has been watching the economy for long looked on in horror when Cyprus raided all accounts overnight to fund a bail-in in 2012, proving that governments could and would help themselves to the money of the people. Depositors with over €100,000 Euros faced a 9.9% "one-time tax," and smaller accounts were hit with a "tax" of 6.75%.

Then there's the problem of a reduced reserve.

There's something called a DIF (Deposit Insurance Fund) that's used to insure your balance. So remember how we have $9.9 trillion of insured funds? Well, the DIF only has $124.458 billion as per the FDIC report.

I'm not the world's mathiest person but it didn't take any extravagant calculations to discover that is 0.0126 cents for every dollar that is allegedly "insured." Only 1.26% of the money that is "insured" actually has existing liquid money available to pay you back.

So what happens when everything goes sideways at once? Will you be able to rely on that FDIC coverage? I can't see how you could. As long as everything runs along smoothly, you'll be fine. But if a lot of stuff goes bad at once?

We're in big trouble.

You are not as protected as the banks want you to think you are. Even Investopedia admits that you will not be covered if you have in excess of 250K in the bank.

In a bail-in scenario, financial institutions would only use the amount of deposits that are in excess of a customer's 250,000 balance.

But in reality, once the FDIC is out of money, how will you be covered at all?

FDIC bankers are openly talking about a bail-in.

In a three-and-a-half-hour "fireside chat," FDIC bankers openly discussed the potential of a bail-in. They talk about the "strategic options" open to the FDIC, making moves over the weekend, and also mention the 40 million accounts they have to dip from "at the time of resolution." 

They talked about keeping it from everyone who does not have a "professional need to know." And to an extent, I get it. A bank run would certainly hasten the collapse, and everyone's just trying to kick that can. But, I certainly want to be able to protect my money, and if they wanted to keep this hush-hush, I'm not sure why they made their conversation public. Did they just think that the American public was too busy watching TikTok videos to notice?

It's chilling how calmly these people discuss the imminent danger and how to keep people from wigging out about it.

This is not me saying that the bankers are coming for your money.

This is the bankers saying it.

Now, it's possible that this contingency plan will not be enacted. We may get within days of it like they did in Greece. But the fact that strategies are being put into place to do so should be a giant, clanging warning bell right in your ear.

Originally published at The Organic Prepper