Flashback: On January 15, 2009, the head of the Federal Deposit Insurance Corporation, Sheila Bair, insisted that deposits in American banks were secure:

“The FDIC will never go broke. We are still running at a surplus, our reserves seem to be quite fit for the projected closure activity that we have,” Bair said.

Bair said the FDIC won’t rule out that in the future they may need to borrow from the Treasury, but added: “At this time it doesn’t look like we will have to do that.”

Flash-forward: To Sheila Bair we say “Good Call!” As of today, November 27, 2009, the FDIC is not only broke, but $8.2 Billion dollars in the red:

It’s official: the overwhelming number of bank failures since the onset of the nation’s financial crisis have pushed the FDIC’s insurance fund into negative territory. The agency said Tuesday that its reserve used to protect consumers’ deposits when a financial institution goes under is $8.2 billion in the hole.

For another flashback, we direct you to the first full day of the Obama administration being in office. In an interview with CNBC on January 21, 2009, Ms. Bair rejected predictions that the banking system is facing ruin:

“It needs to be emphasized and re-emphasized that these banks are solvent, they’re well capitalized, overwhelmingly.”
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“At the end of the 3rd quarter [2008], 98% of all banks are well capitalized, representing 99% of all assets.”

Flash-forward: As of today, 122 banks have been listed on the FDIC’s Failed Bank List since the date of Ms. Bair’s CNBC interview. There are roughly 8099 commercial banks operating in the United States, which means that thus far, 1.5% of all banks have failed. If we were to stop counting today, and say the crisis is over, 98.5% of banks out of the original 8099 since Ms. Bair’s interview, would be considered well capitalized. But, today is Bank Failure Friday, so it is almost assured that more banks will be going down tonight. If we lose just 40 more banks, we will hit Ms. Bair’s 98%. Given these numbers, does anyone really believe that 98% of all banks are well capitalized? Considering the fact that 552 banks are now on the FDIC’s problem list as of the end of September 2009, it doesn’t take an economist to figure out that 98% of banks are not well capitalized. We will experience an acceleration in bank shutdowns from going forward, especially if the coming wave 2 meltdown of residential real estate and the soon-to-be mainstream commercial real estate crisis is taken into account.

Why does this whole “we predict everything is going to be ok” situation seem so oddly familiar?

Oh yes, that’s right. It was our President and Federal Reserve Chairmen who said we would not exceed 8% unemployment because of the stimulus and bailouts, and all of a sudden, as of this month, the official unemployment rate is at 10.2%, and unofficially at around 22%.

Does it seems like our elected and appointed leaders are lying to us? Or are they so incompetent that they did not see any of this coming. Whether it is the former or the latter, they are obviously not fit for the job.

We’ve said it before, and we’ll say it again. If you are expecting the crisis to end because someone in the White House, Congress, Treasury or The Fed says it is going to end, then you are setting yourself up for a fall. The system is not well capitalized, the housing market is not recovering, and the money in your bank is not safe. There is another wave coming, and even the mainstream has begun talking about a double-dip recession. In our opinion, this is not a double-dip, it is simply the next leg down in the Greatest Depression.