FDIC Salvage Op's Can't Hide Reek of Corpses

With Friday's latest salvage operation – this one involving six zombie-banks – this brought the number of U.S. banks buried by the FDIC so far in 2009 to 140. With roughly ten days remaining in the year, the final tally of U.S. bank-failures is on pace to reach 144 for 2009, or a “gross”. This is a fitting number of failures for a sector which is still overflowing with the unburied dead.

As we hover on the brink of a New Year, one fact is painfully obvious: 2010 will be a much worse year for U.S. banks than 2009. The reasons for the continued decay of this sector are numerous, so I hope readers will forgive me if I inadvertently omit a few of those factors.

The over-arching basis for the continued disintegration of the U.S. financial sector is the relentless downward spiral of the U.S. economy. Yes, I know: the U.S. economy is supposedly “growing”. However, once the rhetoric and fraudulent statistics are subtracted from this picture the truth is painfully clear.

The U.S. is a consumer-economy, where the consumers aren't consuming. The U.S. is a credit-based economy – dependent on its economic growth for the last 30 years on ever-expanding credit – which is currently seeing available credit shrink every month. U.S. employers aren't hiring, after the largest/fastest disgorgement of workers in the United States in more than 70 years. With its consumer-economy populated by consumers with no jobs, no savings, and no credit, it is obvious that the U.S. economy can't grow. Statements (or “statistics”) to the contrary are merely the relentless brainwashing of the U.S. propaganda-machine.

In a consumer economy based upon credit, the health of the financial sector should be the least of the U.S.'s worries. Financing the world's most reckless consumers has always been an extremely lucrative proposition for American banks. Therefore, with this economy supposedly returning to “growth”, the health of U.S. banks should be automatic – especially given the new, fraudulent accounting rules in the U.S., which allow banks to bury losses in their books essentially forever.

However, even being able to hide all their losses, and being able to “borrow” infinite amounts of money at 0%, the collapse of this sector is steadily accelerating. By mid-year, U.S. bank failures had accelerated to 10 per month. By the three-quarter mark, that number had risen to an average of 11 per month, and by the time the year ends, that average will have moved up to 12 per month.