FDIC: Bailer Becomes Bailee

We don't hear much about failing banks but make no mistake, banks are failing at an accelerating rate.So far, this year, 30 banks have failed putting the FDIC reserves in the red to the tune of $20.9 billion.

At December 31, 2009, some 702 banks made the problem list.Last year at the close of 2008, only 252 banks made the short list.Now it is expected that declining residential and commercial property values will cause an increase in bank failures for 2010, up from the 140 posted last year.

With the FDIC already running in the red, it is very possible the FDIC will be required to tap into a $100 billion line of credit from taxpayers.The FDIC has always boasted that it does not operate on government money, rather it funds itself through insurance premiums paid by member banks.

Looks like that is about to change.If 30 banks have failed so far this year and the FDIC is already in the red, I'm not sure but increasing the number of failed banks by 300% is probably going to grow that negative reserve balance significantly higher.

Once again the taxpayer is going to be asked to bail out . . .the taxpayer.

Meanwhile back at the debt window, debt continues to pile on.Today it is $13 trillion, by the end of the year $14 trillion.Six months after that $15 trillion and there is no end in site.

Indeed debt is driving global gold demand.In Germany, citizens can't get enough and some European mints are simply out.Physical gold is king.Gold as an investment is growing more popular than ever.Some people look at inflation and gold as their motivation to buy gold in whatever amount they can afford.

Still others look at deflation, and see the threat deflation poses to countries and their respective markets.

It's just not a good sign when the bailer becomes the bailee.Last bailee wins I guess.