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1. Paulson appears on Face the Nation and says "Our banking system is a safe and a sound one." If the banking system were sound, everyone would know it (or at least believe it). There'd be no need to say it.
   
   
2. Paulson says the growing number of troubled banks "is a very manageable situation." Here's the reality: There are 90 banks on the list of problem banks. Indymac wasn't one of them - until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?
   
   
3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order.
   
   
4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier's checks. It's ironic that customers pulled insured deposits out of Indymac after it went into receivership. It's also ironic that they would then want to deposit those funds in Washington Mutual - the last place one would want to put them.
   
   WaMu eventually decided it would take those checks, but with an 8-week hold. Will Washington Mutual even be around 8 weeks from now?
   
   
5. Paulson asked for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after saying "Financial institutions must be allowed to fail." Paulson's obviously reporting from the 5th dimension; only in some alternate universe would his statements make sense.
   
   
6. Former Fed Governor William Poole says Fannie Mae and Freddie Mac losses make them insolvent.
   
   
7. Paulson says Fannie Mae and Freddie Mac are "essential" because they represent the only "functioning" part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only "functioning" part of the mortgage market is insolvent?
   
   
8. Bernanke testified before Congress on monetary policy, but didn't comment on either money supply or interest rates. Nowhere in his testimony did he even mention the word "money." The only time "interest rate" appeared was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is deathly scared of interest rates and the money supply?
   
   
9. The SEC issued an order to protect those most responsible for naked short selling. As long as the investment banks and brokers were making money, naked shorting was fine and dandy. However, when the bears began using the tactic against the big financials, the existing regulation is suddenly selectively enforced, and with a vengeance.
   
   
10. The Fed takes emergency actions twice during options expirations week with regard to the discount window and rate cuts.
    
    
11. The SEC takes emergency action during options expirations week regarding short sales.
    
    
12. The Fed has implemented an alphabet soup of pawnshop lending facilities, whereby the Fed accepts garbage as collateral in exchange for Treasury bonds. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF).
    
    
13. Citigroup (C), Lehman (LEH), Morgan Stanley (MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of Level-3 assets. Level 3 assets are commonly known as "marked to fantasy" assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what they'd fetch on the open market.
    
    It's debatable if any of the above firms will survive in their present form. Some may not survive in any form.
    
    
    
14. Bernanke openly solicits private equity firms to invest in banks. Is it even remotely normal for a Fed Chairman to undertake such an action?
    
    
15. Bear Stearns was taken over by JPMorgan (JPM) days after assuring investors that it had plenty of capital. Fears are high that Lehman will suffer the same fate. Worse still, the Fed was forced to guarantee the shotgun marriage between Bear Stearns and JPMorgan by providing as much as $30 billion in capital. JPMorgan is responsible for only the first $500 million. Taxpayers are on the hook for the rest.
    
    Was this a legal action for the Fed to take? Does the Fed care?
    
    
16. Citigroup needed a cash injection from Abu Dhabi and a second one from elsewhere. After announcing it wouldn't need more capital, it's raising still more. The latest news: Citigroup will sell $500 billion in assets. To who? At what price?
    
    
17. Merrill Lynch raised $6.6 billion in capital from Kuwait and Japan, announced it didn't need to raise anymore - then raised still more capital just a few weeks later.
    
    
18. Morgan Stanley sold a 9.9% equity stake to China International. CEO John Mack made a show of not taking his bonus. How generous. Morgan Stanley fell from $72 to $37. Does CEO John Mack deserve a paycheck at all?
    
    
19. Bank of America agreed to take over Countywide Financial and twice insisted that Countrywide will add profits. Inquiring minds ask: "How the hell can Countrywide add to Bank of America earnings?" Here's how: Bank of America just announced it won't guarantee $38.1 billion in Countrywide debt. Questions over "fraudulent conveyance" are now surfacing.
    
    
20. Washington Mutual agreed to a death spiral cash infusion of $7 billion and accepted an offer of $7.85 when the stock was over $13. WaMu has since plummeted from $40 to a price near $5 after a huge rally.
    
    
21. Shares of Ambac (ABK) fell from $90 to $2.50. Shared of MBIA (MBI) fell from $70 to $5. Sadly, the top three rating agencies kept their rating on the pair at AAA nearly all the way down.
    
    No one can believe anything the government sponsored rating agencies say.
    
    
22. In a set of moves that looked like panic, the Fed slashed interest rates from 5.25% to 2%. This was the fastest, steepest drop on record. Ironically, Bernanke spoke of inflation concerns the whole way down. The Chairman is clearly unable to tell the truth. He doesn't have to - actions speak louder than words.
    
    
23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.
    
    
24. There's roughly $6.84 trillion in bank deposits, of which $2.60 trillion is uninsured. There's only $53 billion in FDIC insurance to cover $6.84 trillion in bank deposits. Indymac alone will eat up roughly $8 billion of that.
    
    
25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where's the rest of the loot? The answer is: In off-balance-sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds (where, amazingly, debt's paid back with more debt) and in all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30 to 1 or more. Those loans can't be paid back.
    

And what can't be paid back will be defaulted on. If you didn't know it before, you do now: The entire US banking system is insolvent.

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