Denninger’s take on GDP, or more accurately the FDIC mess as it relates to GDP:
http://market-ticker.denninger.net/
[quote]Now add into this the FDIC mess. After I posted my missive yesterday I was sent a table showing the FDIC’s remaining funds. I have not done a comprehensive analysis on this but I did eyeball it and the quick check appears to be good; I can’t vouch for this on my own detailed analysis but if this is accurate the FDIC is down to $800 million dollars, and a failure of any of the three "seriously in trouble banks" - Colonial, Corus or Guaranty - would blow that tiny little pile of money to Mars.[/quote]
[quote]Inquiring minds are wondering if the correct meme is in fact something like this:
The economy is "improving" because the government showered borrowed money in the form of massive handouts into the economy. However, the government also allowed banks to hide stupendous losses - a trillion dollars or more - by intentionally overstating the value of assets."Prompt Corrective Action" is supposed to insure that when the FDIC takes over a bank it suffers little or no loss. This has worked well for over a decade and justified the FDIC holding only $50 billion in cash to insurance $8 trillion in deposits.
But the government’s policy of allowing these outright lies in relationship to asset values has now resulted in the FDIC taking 40% losses against assets on average for the banks it has closed since this crisis began.
The consequence is that what looked like a reasonable policy - holding some 1/2 of 1% in insurance, or a leverage ratio of almost 160:1 - has now been shown to be insanely reckless.
These losses are almost entirely as of yet unrealized, but they are real and they are inescapable. They WILL be taken. The FDIC has a "credit line" with Treasury but there is no possible way for it to be able to absorb $400 billion - a rough estimate of the amount that will be absorbed - without a tremendous burst of new debt issuance and the risk of an all-on collapse in both the stock and credit markets.
Enjoy the rally, but keep your eye on the door and your path to it.[/quote]