FDIC: “We’re not broke yet!”

So, the FDIC Quarterly reported a 20 percent decline in the Deposit Insurance Fund during second quarter, from $13 billion to $10.4 billion, which is considerably more than the $4 billion than the estimated losses indicated, much less the -$4.4 billion that I calculated based on the 1.94 balance reduction/estimated losses ratio that applied to the previous five quarters.

The answer is due to the Special Assessment which brought in an additional $8 billion or so from the insured banks, as otherwise the balance would have been reduced to $2.4 billion. The FDIC also announced another Special Assessment would be collected during the third quarter; since estimated losses in the third quarter have already surpassed those of the second quarter, $10.2 billion to $9 billion, it will have to be even bigger than the previous one.

The problem is that there is no explanation for why the FDIC has suddenly gotten so much better at estimating its losses. Whereas the ratio reliably averaged around 1.9x the previous five quarters, in the second quarter it miraculously improved to 1.2x. This seems… questionable at best, especially given the way that the situation is clearly worsening for the banks in general.

There are now about 102 banks in the state operating in the red, up from 76 in the first quarter and 74 a year ago, according to quarterly financial results the federal government released Thursday. Nationally, 28 percent of banks were unprofitable.