On October 23rd, the FDIC shut down seven insolvent banks with $1.03 billion in deposits. FDIC-estimated losses as a percent of assets were 30.6%. This brings the total number of seized banks in 2009 to 106, the amount of failed deposits to $91.8 billion, estimated losses as a percent of deposits to 29.3%, and the percentage of failed deposits to 1.21 percent. The percentage of failed deposits in 2008 and 2009 is averaging 2.3% annually, which is twice as high as the 1.1% average rate of failed deposits in 1929 and 1930.  Note also that even estimated losses are running nearly four percentage points higher than actual losses to depositors during the pre-FDIC part of the Great Depression, which were 25.7% from 1929 through 1933.

As was pointed out this week on the Market Ticker, there is absolutely no chance that bailout banks such as Bank of America, JP Morgan Chase, Wells Fargo and Citi are accounting for their assets at anything close to their real value when the estimated losses to the FDIC’s insolvent deposit fund prove that at least one-quarter of the assets owned by more than 100 failed banks were worthless. The problem is probably worse than it appears, however, as over the last two years, real FDIC losses have exceeded estimated losses by a ratio between 1.69 and 1.94 depending upon the quarter.  Since estimated losses are presently equal to 24.4% of failed bank assets in 2009, this indicates that the actual value of the assets currently held by U.S. banks are somewhere between 41% and 48% of what they are presently reported as being.