WND:

The two hallmarks of the Great Depression were unemployment and bank failures. While the same economists who denied there was a recession for the first nine months of the economic contraction are now insisting that it is over and the recovery has begun, I am extremely dubious. Since the crisis became apparent, I believed that 2009 would be the equivalent of 1930, that being the year that everyone expected recovery to be waiting around the corner. But while there are some statistical green shoots, there are also numerous signs that the perceived recovery is illusory, and in fact, the economic situation is more dire now than it was 79 years ago.

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Despite these widespread banking collapses, the American public has remained relatively quiescent, mostly because they believe their deposits are safely insured by the Federal Deposit Insurance Corporation. The problem is that the FDIC has now run out of money; the losses caused by the 81 bank failures this year has completely exhausted the Deposit Insurance Fund
. At the beginning of 2008, the DIF had a balance of $52.8 billion. At the end of the year, during which 25 banks failed and caused $17.9 billion in FDIC-estimated losses, the fund was down to $17.3 billion.

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Given recent history, it would appear to be most unwise to assume that the federal government will do much more than permit the FDIC to borrow the additional $70 billion by which its credit line was increased in May, especially should depositors become aware of the increasingly fragile state of the banking system and begin to withdraw their funds from it. Banking holidays and other restrictions on the public’s ability to access its money are probably more likely than an outright bailout , especially since a bailout will cost around $225 billion merely to maintain the status quo if Meredith Whitney’s calculation of 300 bank failures is correct.

My comment: I agree with the overall analysis that Vox has written with regard to his assessment of the amount of bank failures and the lack of funds at FDIC. I disagree with his view that that the Federal Government will not attempt to bailout the FDIC. $225 billion is nothing at this point and considering that the entire US economy is a Ponzi scheme waiting to collapse the last thing the FEDS want is banking holidays as this would be flat out admitting that the con is up. As long as the Treasury can get away with selling bonds and the FED can inflate and it is not being checked by the markets then the game can continue. Below is an article that talks about the before mentioned upcoming bank failures.

CNN:

A prominent banking analyst said Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry’s payments to keep the Federal Deposit Insurance Corp afloat could eat up 25 percent of pretax income in 2010.

Richard Bove of Rochdale Securities said this will likely force the FDIC, which insures deposits, to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system.
"The difficulty at the moment is finding enough healthy banks to buy the failing banks," Bove wrote.

The FDIC is expected on August 26 to vote on relaxed guidelines for private equity firms to invest in failed banks, after critics said previously proposed rules were too harsh and would actually dissuade firms from making investments.

Bove said "perhaps another 150 to 200 banks will fail," on top of 81 so far in 2009, adding stress to the FDIC’s deposit insurance fund.

My comment: Mr. Bove, who regularly shills on CNBC for the banking industry, is being a bit conservative in my view. I have seen estimates of bank failures over the next two years of close to 1000 banks and $900 billion in losses. If the latter takes place then there may be bank holidays in our future. I do not see the US stockmarket making new highs in that environment.

John Polomny
The Real Deal