March 24, 2013

The FDIC Lacks The Resources To Cover Major Losses In A Systemic Failure

"While the FDIC currently has about $25 billion available to bail out failing banks in the event of isolated events (mainly held in U.S. treasuries that would need to be sold), it insures more than $10 trillion in deposits. Clearly it lacks the resources to cover major losses in a systemic failure. A failure of just one of the nation’s forty largest banks could swamp the resources of the FDIC. I believe that a significant spike in Treasury yields, to say 6%, would result in the failure of several major banks. Bank of America and Citibank for example each have over $1 trillion in deposits. Where would the FDIC get the money to make the depositors whole in such a situation? The government would be unlikely to pass a major tax increase to fund an FDIC bailout. More likely the Fed would print the money. In that event, depositors may not lose their money, but their money will lose much of its purchasing power." - an excerpt from Cyprus Lifts the Curtain

Related stocks and ETFs: Financial Select Sector SPDR (XLF), Bank Of America (BAC), Wells Fargo (WFC), Citigroup (C), JP Morgan (JPM)

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
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