Last March, I posted on whether we were at the beginning of the Greatest Depression. Back then, my reasoning was that there was $6.1 trillion in financial toxic waste -- in the form of Collateralized Debt Obligations (CDOs) -- in our financial system resting on a sliver, a mere $340 billion, in capital.

Therefore, a 6% decline in the value of that toxic waste would wipe out the bank capital. (I should have added in another $6 trillion in mortgage-backed securities). When you consider that Merrill Lynch sold $31.6 billion of its CDOs last year for 22 cents on the dollar, you realize that toxic waste needed an 80% haircut rather than a 3% one -- and voila -- you've wiped out all the capital!

If you look at some basic statistics comparing the current economic situation with that of the Great Depression, you might think that we are in relatively great shape. Our unemployment rate now is 7.2% -- at its nadir, 25% of the population was unemployed in the Great Depression.

The year 2008 saw a slew of discount M & A (mergers and acquisitions) deals, most of them below book value. Among these were Wachovia and National City. Capital One Financial bought Chevy Chase Bank at .64 times book value.

If you look at the financial landscape for 2009, some names are already popping up for distressed sales, such as Citizens Republic Bancorp (NASDAQ:CRBC), Huntington Bancorp (NASDAQ:HBAN), Midwest South Financial (NASDAQ:TSFG) and Colonial Banc Group (NYSE:CNB).

It seems that we will see a continuation of the purging of bad bank assets in 2009. Banks use a practice of good/bad assets and move their worst assets to a separate company that absorbs the assets' future losses. Then the original bank emerges as a healthier, deleveraged institution.

All of this is taking place under the radar and it is difficult for investors and the public to know which banks are using this practice. When deleveraging becomes unmanageable, the federal government may need to step in and absorb a bank losses to avoid the bank's failure.

Do you believe the financials are a place to invest in 2009?

The Washington Post reports that the number of bank failures has been surprisingly low. But the crunch count is likely to grow as the problem bank list triples from 90 to 300 over the next three years. Meanwhile, the Federal Deposit Insurance Corporation (FDIC) could run out of money to pay off depositors of future failed banks unless it raises its deposit insurance rates from their current 5.4 cents per $100 deposits.

But the most interesting question is whether the White House is propping up banks that should fail so that it can push the biggest part of the cleanup into the lap of the next President. It is certainly bringing out all the biggest economic guns to delay the inevitable reckoning from the $8 trillion credit collapse. It spent $29 billion bailing out Bear Stearns, sent $160 billion worth of checks to taxpayers, cut interest rates from 5.25% to 2%, and seems belatedly to be enforcing regulations against manipulation of oil trading.

The Post quotes industry experts who think that the FDIC is propping up many banks. For instance, Bert Ely of Ely & Co., a bank consulting firm in Alexandria, VA, told the Post, "They are dragging their feet in forcing these banks to reserve realistically. Some of these banks could have been closed two or three quarters earlier." And Ken Thomas, a lecturer in finance at the Wharton School at the University of Pennsylvania, told the Post that the FDIC's foot dragging would only cost taxpayers more in the long run. Thomas said, "In some of these cases, I believe regulators should act sooner than later to prevent future losses to the fund."

I've always been a fan of another week coming to an end -- marking Friday's showing with a salutatory TGIF. It's a day that most Americans spend getting comfy for the weekend, hitting a club, taking a road trip, etc. But before you rush to the ATM to withdraw cash for your weekend rendezvous, you might want to pay close attention to whether your bank will still be in business by Monday morning.

Nearly 10 banks have failed so far this year and as financial institutions struggle with billions of dollars worth of sour mortgage portfolios, you can best believe that more failures will soon follow. And after analyzing recent collapses, a pattern seems to be developing.

Recent Bank Closures:

• IndyMac Bancorp., seized on July 11 -- a Friday.
• 1st National Bank of Nevada and First Heritage Bank, both seized on July 25 -- another Friday
• And on Aug. 1, First Priority Bank of Bradenton, Fla., seized on -- you guessed it -- a Friday.

Is it just a coincidence or are bank regulators being slick about shutting them down after the close of business Friday when the public is less likely to be watching? I've wondered about this fact and have seen others express the same concern on message boards. Or how about trying to to avoid a panic, which led to the run on IndyMac?

Whatever your pick, be forewarned. Mind your assets -- it's OK to be fashionably late for the party. Cheers!

FDIC Chairman Sheila Bair has been sounding alarm bells for more than a year about the hazards for banks as foreclosures increase. Now, her worst dreams may soon be reality. This morning, the FDIC released its year-end numbers and the number of "problem" institutions jumped to 76 at the end of 2007, up from 45 a year earlier -- a 69% increase. At the end of the third quarter that number was 65.

As a result, the FDIC is staffing up. The Wall Street Journal reported that the FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. At the height of the savings and loans crisis in 1993, there were 572 "problem" institutions, and back then the FDIC had more than three times the number of employees it has today. So the FDIC needs to hire some new folks who can quickly get up to speed in the process of dealing with bank failures. More than 90 duty locations are listed for R&R [Resolutions and Receiverships] Specialists, but the announcement specifically indicates that the FDIC plans to rehire 25 retirees. If you've got the experience the pay is great: $67,836 to $180,770.

Employees hired according to the job listing will "engage primarily in resolution and receivership activities of financial institutions. They will be responsible for gathering, compiling, researching and manipulating financial data to prepare a variety of financial documents, management reports and presentations." They must be able to "analyze financial statements, operating and project reports, cost data, managerial practices, capital and reserves, credit condition, loan file documentation, cash flows and other elements to determine the soundness of the assets held by an insured institution and determine the risks and value of the assets and liabilities." FDIC obviously wants to hire quickly. The job listing opened on 2/20/2008 and closes on 2/28/2008.