Last week, the FDIC oversaw the second biggest bank failure in U.S. history -- $32 billion IndyMac Bancorp (NYSE: IMB). I thought more would be on the way and this morning's New York Times estimates that 150 of the 7,500 U.S. banks will fail in the next 12 to 18 months. The FDIC only has $53 billion in its fund to cover bank failures so it is going to be needing much more cash, which it may get from raising insurance rates. No doubt those of us with bank accounts will pay the price.

For those looking to profit from this failure, it's time to get a hold of the FDIC's problem bank list and start estimating the ones that are most likely to get taken over. Here are some hints: look at their mortgages as a percent of total loans, their cash flow, when they have to pay back their debt, and the increase in the rate of their bad loans. The Times mentions two that are probably already on the radar of short sellers:

• BankUnited Financial Corporation (NASDAQ: BKUNA) in Florida, which trades at 77 cents a share and is probably too far gone to profit from as a short, went for $20 a share a year ago.
• Downey Financial Corporation (NYSE: DSL) in California, which trades at $1.69 today, traded at $65 a year ago.

It looks like the market is pretty efficient when it comes to these troubled banks. The real profits will be made by people who figure out which banks are about to be added to the FDIC's problem banks list.

What worries me is whether there will be any end to this scheme of giving profits to the executives and losses to taxpayers. To profit from this, it's time to start shorting these banks well before they fail -- CNBC has some more of the names here.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.