Banking Demystified

Doug French reports:

Those under the delusion that it was an orgy of deregulation and lack of government oversight in financial markets that has led to the current crash and rash of bank failures and bailouts will be overjoyed to learn that the Federal Deposit Insurance Corporation (FDIC) is doubling its operating budget for 2009 to $2.24 billion and will increase its workforce by 30 percent to 6,269.

The pace of bank busts is quickening, with nearly half of this year’s 25 failures coming in the current quarter. There were only three failures in 2007 as the real estate boom still had fainting signs of life left in it and there were no failures from June 2004 through February 2007 when the boom was in full swing. This boom was driven by huge increases in the money supply created by the Federal Reserve which led to massive mal-investment in: row after row of single family tract homes that were scooped up by panting speculators who financed their punts with cheap no-money down loans, strip malls and suburban office buildings, skyscrapers and casinos the world around.

If you want to understand banking read this article.