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With the U.S. economy still plummeting downward, and the U.S. banking sector still hopelessly insolvent, the objective of the FDIC appears to be to try to ignore this crisis as much as possible – and hope these problems magically disappear.

While the FDIC's list of “problem banks” soared by 21% in the first quarter of this year from Q4 of last year, the list itself remains a joke. Many of the banks which have already failed never even appeared on this list. Thus, the only thing we know for sure from the latest FDIC report is that the real number of U.S. banks in imminent danger of collapse is much higher than the fantasy-figure of 305 reported by the FDIC.

Even so, these understated numbers are still very troubling. While the number of “problem banks” increased by over 20% in a single quarter (to the highest total in 15 years), the total assets held by these banks rose by 38% - to $220 BILLION.

This comes at a time when the FDIC's “insurance fund” plunged by 25% - also to a 15-year low. The FDIC has already committed itself to large hikes in insurance premiums for U.S. banks (yet another “hit”to the bottom-line). Even so, it is obviously only a question of “when” (not “if”) the FDIC heads back to the federal government for another bail-out – to top-up this “insurance fund” to a level high enough to cover bank losses (for this year).

Even with these bleak facts and numbers, the real story here was a recent policy-change announced by the FDIC – which was totally ignored by the U.S. propaganda machine. In conjunction with two other regulators, the FDIC announced their intention to raise the threshold which triggers a review of bank failures from $25 million to somewhere between $300 and $500 million (see “U.S. bank “watchdogs” want to be LESS vigilant”).

Based on the statistics on bank failures from 2008, this change would eliminate 90% of these bank-failure reviews. Thus, at a time when bank failures have already risen to a multi-decade high (with much worse to come), the response of U.S. regulators is to simply try to avoid looking at the problem.

Despite doing her best not to understand the severity of this crisis, FDIC-head Sheila Bair had the audacity to claim that 97% of U.S. banks were “well capitalized”. Presumably, this assessment of “bank health” was based on the same ridiculously optimistic parameters which Tim-the-tax-cheat used in his fraudulent, public relations farce: the bank “stress tests”.

The FDIC's supposed “justification” for lowering its standards in reviewing bank-failures is a “lack of staff”. This makes a mockery of the supposed “Obama stimulus program”. At a time when record-number of banking industry professionals are getting “the axe”, and when Obama supposedly wants to spend “stimulus” dollars to increase employment, apparently the FDIC can't get a few million dollars to top-up its staffing levels to a point where it is capable of performing its duties properly.

We now have a scenario where the valuations on bank balance sheets are more dubious than ever (see “FASB strong-armed into mark-to-fantasy accounting”). At the same time, the risk of current and future risks of bank failure are assessed on the basis of “pie-in-the-sky” optimism, and with a soaring number of failures taking place, the chief regulator wants to reduce its level of scrutiny of these failures by 90%.

It is only a matter of time until naïve and myopic investors realize they are being scammed again by the Wall Street crime syndicate, and their servants in the U.S. government. When that day arrives (soon) private capital for these fraud-factories will once again totally dry up – and share prices will collapse back down to where they belong: below the lows of last year.

The only thing more inexcusable than being victimized by a “Ponzi scheme” is to be “fleeced” several times by the same group of scammers. Those caught holding shares in these companies deserve the HUGE losses which await them.

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