Von, thanks for the links.

Go easy on Iowegian. I don't think he is the enemy. He said in a post below he liked gold so he can't be all bad. LOL

I think a lot of good community bankers are just as pissed at what is going on as the rest of us. After all, they have been paying big time FDIC insurance primarily to back up mistakes not of their doing. It would not surprise me at all to learn that a lot of bankers don't even understand how the system works. I would bet it has been as big of surprise to a lot of them as it has to us. A lot of this macro stuff is just not the nuts and bolts that a local banker would deal with everyday. I was on a bank board for six years and I can tell you this big picture stuff just does not come up. It is all assumed someone higher up knows what the hell they are doing and obviously that was not the case. The day to day banking stuff just does not normally have to even fathom the stuff we are talking about..........till now. The passengers don't worry about how a train stays on its tracks until it starts coming off.

What you and Denninger point out is good. I think the problem is if they let one dominoe fall, the rest of the dominoes are toast also. In other words if they cram down the bond holders, banks in a big part are bond holders and will cause additional banks to fail, and on, and on, and on. So they are basically screwed, they know it, and the best they can do is to try and get the rest of us to pay for it all by whatever means thay can slip by without a revolution.

As far as the FDIC doing its job, since assets are marked to fantasy now, how does the FDIC know when to step in? How can they know? I have not payed much attention to bank failures lately (they have become so commonplace it is kind of a non-event any more) but when I did a year or so ago, the FDIC as I recall was having to pony up about 50% of the assets. In other words, not only was the bank insolvent, but it had been insolvent long enough or to a degree that the FDIC had to pay out big time. In more normal times, a bank would have been shut down AS it became insolvent so the FDIC would have found another bank to pick up the pieces and maybe only had to pay out a small amount. These banks have been way past ripe which means the FDIC were dragging their heels (or just could not get to all of them OR the asset prices and default rate dropped like a rock) and hoping and praying things would turn around and asset prices, repayments and solvency would miraculously reappear. Well we see how well the "recovery" went. And this is after pumping trillions in to try and prop up the markets.

The fact is, the whole system was bankrupt and band-aids and super glue is all that has been holding it together. If they cram down the bond holders............... well the band-aids and super glue ain't gonna do it.

John