A tenth US bank failed and there are some estimates that the total could hit a hundred. The problem with that is that the FDIC does not have the capital to cover all of those deposits. The money will have to be borrowed, probably from the Treasury. That means the taxpayers.
According to The New York Times, "Integrity Bank of Alpharetta, Ga., on Friday became the 10th United States bank to fail so far this year, hurt by the very business it was built on - real estate lending." The FDIC will have to cover the value of as much as $350 million in assets.
Pessimists, who may become realists if the recession gets deeper, believe the mortgage-backed securities problems, real estate loans, and credit card defaults could drive bank failures into the hundreds. The FDIC would have to bring in billions of extra dollars.
The US taxpayer is already burdened with the costs of higher gas and food prices and tight credit. Now, he will be asked to pay for the excesses of the banking industry. That may not be fair, but his taxes are the money pit of last resort.
Douglas A. McIntyre is an editor at 247wallst.com.
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