The End Is Near.
posted by HMS at Marc Faber Blog - 5 hours ago
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Jim’s Mailbox Posted: Apr 26 2010 By: Jim Sinclair Post Edited: April 26, 2010 at 12:51 am
Filed under: Jim's Mailbox
Dear CIGAs,
CIGA Richard outlines the danger that the FASB, those we trust to keep auditing accurate, has placed us all in. They have made lies valid accounting values.
Richard’s work is clear, accurate and revealing.


Dear Jim,
The FDIC closed seven more banks this week, all of them in Illinois. Collectively, they had reported assets of $6.33 billion and deposits of about $5.80 billion.
The FDIC announced that its estimated cost of closing these banks is $974 million. It also announced that in connection with these closings, it entered into loss share agreements covering $3.81 billion in assets. That brings its total exposure on loss share agreements to about $145 billion so far in this crisis.
Based on the FDIC’s loss estimates, the actual value of the seven banks’ assets, represented to be $6.33 billion, was only $4.83 billion. That suggests that on average, bank management over-stated the value of these assets by at least 31%.
The largest of the seven banks closed was Amcore Bank, N.A., of Rockford, Illinois. Amcore had stated assets of $3.8 billion and deposits of $3.4 billion. The FDIC estimated its closing would cost $220.3 million, only about 6% of the value of its deposits. By that estimate, the true value of its assets is about $3.18 billion, and had been overstated by about 19%.
That’s a great result for the FDIC if its loss estimate for Amcore proves to be correct. However, an estimate this “optimistic” is troubling in the context of the FDIC having entered into a loss share agreement with respect to $2.0 billion of Amcore’s assets. If the assets perform worse than expected over the next eight to ten years, the FDIC’s actual loss could turn out to be many times this initial estimate.
Looking at the six other banks closed this week, their reported assets totalled $2.53 billion, their deposits amounted to $2.4 billion, and the estimated cost to close them was $754 million – about 31% of deposits. Based on this estimate, their assets were over-valued by about 53%. These statistics are in line with what has been seen throughout this crisis.
As usual, there were several closings this week that were particularly chilling in their implications for the true health of the banking sector. The second largest of the banks closed, Broadway Bank of Chicago, Illinois, had stated assets of $1.2 billion and deposits of $1.1 billion. The FDIC estimated it would cost $394.3 million – about 36% of deposits – to close the bank, meaning it believed the real value of Broadway’s assets to be about $706 million. Based on that estimate, Broadway’s management over-stated the value of its assets by 70%.
Lincoln Park Savings Bank of Chicago, Illinois, had stated assets of $199.9 million and deposits of $171.5 million. The FDIC’s estimated cost of closing the bank was $48.4 million, about 28% of deposits. That means it believes Lincoln Park’s assets are really worth about $123.1 million, and had been over-valued by about 62%.
Given the steady flow of bank closings this year, it is remarkable to observe how little attention they are given by the mainstream press. The simple device of reporting these closures on Friday evenings pretty much ensures they receive little if any coverage.
The New York Times reported on November 24, 2009, that the FDIC’s insurance fund showed a negative balance of $8.2 billion as of the end of the third quarter of 2009. By my calculations, the FDIC has reported an additional $18.8 billion in projected losses since that time.
That means that the FDIC has already burned through at least $27 billion of the $45 billion in emergency funding it raised by requiring banks to pre-pay three years’ worth of insurance premiums. That does not even take into account any additional losses that may have resulted from closings costing more than the FDIC originally estimated.
Given that (1) bank closings continue unabated, and (2) the FDIC has already guaranteed the value of about $145 billion of the closed banks’ most dubious assets, it stands to reason that the remaining $18 billion has been wiped out as well, or will be within a matter of weeks. From that point forward, all additional losses will fall directly on the U.S. taxpayer. Quantitative easing is guaranteed to continue unabated.


Respectfully yours, CIGA Richard B.






Quote of the day.

"If you are in the hip pocket of any political party, prepare to be sat on." - Dr. Gary North