Here is a short test.
1. Has anyone seen this ad?
2. If so, where?
3. If you saw this ad, why do you think the FDIC ran this ad? And why now?

There are many reasons to advertise. You need customers (the FDIC does not), you need investors (the FDIC does not), you need institutional support (the FDIC does not), you need institutional awareness (the FDIC does not).

Or it can be a public service announcement. Now we are on to something. But why would the FDIC want the public to be aware of the FDIC and its insurance limitations?

Simple...public confidence.

Now add that to the massive hiring spree that the FDIC is in right now. They are making every effort to rehire past employees with bank foreclosure experience, especially those with RTC (the Resolution Trust Corp. that worked to manage and "resolve" the S&L crash of the early 1990's).

Bank losses have not yet begun to be realized, let along recognized. About 80 banks are now on the FDIC watch list. Only 4 have failed in recent years but the watch list is growing.

By the way, have investors recently lost money in an FDIC insured account? The ad implies no but the real answer is, surprisingly, yes. Anyone with balances in excess of $100,000 (coincidentally the amount of the paper currency in the ad) have not had those excess balances honored.

So be sure that you manage your personal and corporate deposits with this in mind. There are many ways to keep more than $100,000 in each bank but it does take diligent cash management, especially if you have a corporate operating account with regular daily transactions in excess of this limit.

Call us at the Wall Street Shuffle if you want to know how to protect your deposits. Probably a lot of listeners want to know how but just won't take the time to ask.

I'm not saying that the crisis is not over for financial institutions, I'm really not. I am, however, saying that the crisis has barely begun.

My CSIQ (Common Sense Intelligence Quotient) tells me that if a bank takes a loss, it goes directly to equity. If equity is impaired, then reserves are impaired and, therefore, lending limits. Assuming that the bank was fully leveraged (as most are), then every dollar of loss must be replaced with a dollar of new equity. This has not happened.

So, new lending must be curtailed. And it is, right now. Tighter lending standards, greater equity requirements for borrowers and higher interest rates all have the effect of reducing lending. Reduce lending and you reduce bank earnings and the cycle starts all over again.

This is the essences of de-leveraging. HELOC (home equity lines of credit) are cut, personal and corporate lines of credit are cut, unused credit card available credit is cut. Decreasing home prices result in reduced re-fi's, especially cash back re-fi's.

This whole process will put immense strain on our banking systems. Add to this the soon-to-be problem loans to regional and local banks from commercial and retail and residential developers that will fail and you have the virtually complete recipe for increasing financial system failures.

How any moron, including Cramer (last week), could say that it's time to bottom fish in financials right now is beyond me. I'm not the brightest fisherman out there but I can safely say that shorting financials, virtually any financial, will be a much better bet than anything in Las Vegas, or better than just about any other financial advice out there. You are highly skilled (and often just plain lucky) when your winners exceed your losers. Betting against the financials is still the best game in town.