The economic propaganda being issued

It is not complicated to understand how laws are being violated by the FDIC. Karl Denninger in his post details that and why there should be no losses from bank closings (unless there is bank fraud involved). Simply stated, it is the FDIC that is causing the losses by not closing banks when their mandate says they must. Leaving them open beyond this point enables losses to continue to mount to the point that, when they are finally closed, taxpayer funds are needed to bail out depositors. Timely closings would ensure taxpayer funds would not be needed.
There are two possible reasons why the FDIC is in violation of the law. First, they are inept. Second,
they are “playing politics.” While all government agencies suffer from the first (and most from the second), the FDIC has a rather simple task and Sheila Bair, at least based on TV appearances, does not appear incompetent.
It is my belief that the FDIC is playing a form of politics. Whether this is willingly or out of necessity might be debated. Thus far they have closed just over 100 banks. Losses (which should not occur) have been increasing as a percentage of closed bank assets, indicating their “oversight” is becoming worse. Speculations by some analysts of eventual total bank closings exceed 1,000. Whatever the correct number, many eventual closings are already in loss positions and should, by law, have been closed already. So why has the FDIC not performed according to its mandates? There are several reasons:
1. Politically it would not coincide with the economic propaganda being issued by the Administration.
2. Economically, it might not be possible because they are out of funds. Eventually Congress will provide them with whatever funds are needed, but the timing for such an admission, while never good, seems especially bad given the current state of politics.
3. Physically, it is probably not possible to “seize” many more banks than the 5 or so they have been closing most weeks. Staffing levels probably do not allow many more than that.
4. It is doubtful that the FDIC actually knows much beyond the biggest problem banks. Bank regulators have adopted a “pretend and extend” policy that allows banks to “pretend” their loans are good in hopes that they can weather the economic storm. While these regulators are outside the FDIC (and just as guilty as the FDIC in dereliction of duty and law), it means that bank balance sheets represent part GAAP and part fantasy. How can anyone know which banks are in trouble if the balance sheets cannot be trusted?
There is plenty of guilt to go around beyond the FDIC. It starts from the very top, and it started before the Obama Administration. This culture of corruption appears so rampant in Washington that one wonders how we ever return to normal.  By normal, I am not naive enough to say that corruption goes away; merely that it returns to less shameful and expensive levels. That is the best we can hope for.