More unsettling news from the FDIC

We see in the stories in the media about the The Fed and Wall Street but there is very little about the FDIC.  I have written several blogs about the FDIC in what potentially could be the next wave of bad news.  I have written that I don’t think we are looking at another S&L crisis, which we saw in the mid-eighties, however I do believe that banks will be taking a hit which translate into a large increase in real estate foreclosures and bank failures.  We know that the FDCI has been staffing up for anticipated bank failures.Â

Today Bloomberg has reported that  Citigroup, Bank of America and Wells Fargo have the lowest amount of reserves against losses in seven years.  It is predicted the reserves will be eroded in the next several weeks which could leave these bank under-capitalized according to the FDIC.  “This is a nightmare for the country,” said William Isacc,  who was chairman of the FDIC from 1981 to 1985. Banks will “raise what capital they can, then they’ll slow down their growth and stop lending, and what should be a mild recession becomes a much more serious one.”