FDIC Defined: "Financial Disaster Is Coming"

I recently wrote about how I declined the opportunity to purchase a CD from GE whose price and yield were reset due to credit market action. We can look forward to more such episodes from other CD issuers in the near future. You see, the FDIC is asking for its own bailout in anticipation of more bank insolvencies:

Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.

The Connecticut Democrat's effort -- which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner -- would give the FDIC access to more money to rebuild its fund that insures consumers' deposits, which have been hard hit by a string of bank failures.

Our watchdogs know what's coming. The stress tests in progress at major banks are probably uncovering massive losses on mortgages and other non-performing assets. The FDIC needs to be prepared to shutter a lot more failed banks in 2009.