http://calculatedrisk.blogspot.com/2008/11/fdic-two-more-bank-failures-numbers-18.html
As of September 30, 2008, Franklin Bank had total assets of $5.1 billion and total deposits of $3.7 billion. Prosperity Bank agreed to assume all the deposits, including the brokered deposits, for a premium of 1.7 percent. In addition to assuming all of the failed bank's deposits, Prosperity Bank will purchase approximately $850 million of assets. The FDIC will retain the remaining assets for later disposition.
...
The FDIC estimates that the cost of today's transaction to its Deposit Insurance Fund will be between $1.4 billion and $1.6 billion.
$1.4 billion estimated loss / $5.1 billion total assets = 27% loss
(1.6 billion loss would be 31%)
I believe that a "well capitalized" bank is supposed to have 8% equity or more (ie, stockholders investments is 8% of the total assets) that are wiped out before any losses to the FDIC. I don't think 8% cushion is not included in the loss percentage above. So, I think the actual loss in the portfolio would be 27% + 8% = 35%
The FDIC had about 53 Billion in its insurance fund a few months ago, *before* it paid ~10% of it in bailing out a single bank failure that was *not* on the problem bank list. (ie, the FDIC didn't realize it might fail.)
If you read about "level 3 assets", and the arguments over "mark to market accounting", and see the huge percentage losses in the banks that are going belly up, you'll get a strong suspicion that a big chunk of the banking system is probably insolvent. (not to worry tho, bonuses for wall street are safe
)
--sgl
