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Now, if an instition were Solvent - i.e. able to pick itself up by the bootstraps - then why would it need the Treasury to pick it up. This is no different than the Credit Crisis of last year, and now we are going to see a complete unraveling of the Banking instition, down to the very core -- the depositors.

We then see that Loan losses totaled $66.9 billion, which is roughly what I predicted they would be about a week ago. Net interest margins rose, but let's take a look at why. A net interest margin is basically the yield from a loan (the interest) less the expenses. For a toxic asset, the expenses are quite high, so your net interest margin would be a negative number. However, in an ideal world, you would want to have a pretty high net interest margin on each loan. The reason this number is going up is because the banks that ARE lending are making more money because the Fed is giving out money for next to nothing (0.5%). So of course they are making more money, as they were already making money at higher rates.

The worst news in my opinion is this: At the end of June, there were 416 insured institutions on the "Problem List," up from 305 on March 31. Ladies and gentlement, this is the mother of all bad news because we are already unable to prop up the failed banks that have failed thus far, how would we handle another 416? The news isn't great, and despite all of their rhetoric to try and instill confidence in the FDIC, I have not been fooled.

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.