Reversion to the mediocre

Well, that didn't take long did it? Only 24 hours ago, there was much self-congratulation at the "brilliant" rescue of Citi by the US Treasury. Or as Citi's CEO put it with faultless mendacity:

"We reached an agreement based on an innovative market solution to further strengthen our capital ratios, reduce risk, and increase liquidity."

Actually, I can see his point:
1. Innovative: Humm, a government bailout with no strings attached in a capitalist country? Check!
2. Market: since nationalisation is becoming fashionable, I guess the whole economy will be state-run at this rate.
3. Solution: well, until the next set of writedowns in the New Year.

Fast forward to today - the FDIC has published a report on the state of the banking nation, and it is not pretty. The mayhem has spread deep into both the commercial and consumer loan books, with provisions and charge-offs at record highs. The number of banks in trouble jumped from 117 to 171 during the quarter. Perhaps this is the sort of growth the Fed and Treasury are keen to promote?

Take this statement from the FDIC website: "Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system". It is amazing how the mediocre economic leadership of recent times has destroyed that legacy, and confidence has now reverted to Depression era levels. What a waste...