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However, and this is really important, since March of this year there have been nearly 60 banks that have failed with almost 1 bank failing each business day! At this rate there could easily be another 120 banks that will fail after today, and if the exponentially increasing rate is a trend then we could have almost 500 banks fail this year as the Head of the FDIC herself has already come out and said.

Now let's get back to the fund. Remember how we said that the fund only had $13 billion since March of 2009? Well if we have had 60 banks failing since then, and we have come to the conclusion that each bank has about $1 billion in liabilities and insurance losses, then we will have at least another $60 billion in losses to the fund before the beginning of the 3rd quarter (and that still gives us 2 more quarters to have the fund hit even further). Simple math speaking would put the fund at a negative balance of at least $47 billion.

What this means is that the FDIC has been having to borrow from private lenders for almost the entirety of this quarter. This means more liabilities and future losses because of the interest. The FDIC is most definitely insolvent, and my numbers are being very generous. We also have to remember that since March some very large banks have failed - (Colonial and Guaranty just to name a few).

It is very likely that we will see a repeat of the insurance corporations (like the FDIC) going bust this September like we saw last year with the Mortgage Insurers (Lehman, Fannie, Freddie etc). It wouldn't surprise me if Congress bails out the FDIC (afterall $47 billion is a drop in the bucket to congress). But the instability and fear that this will create in the consumer will be irreplaceable, and fall sales will likely take a tremendous hit.