Topic: Insolvency

The hosts discuss the mechanics of the Federal Reserve as the "lender of last resort," arguing that the banking system is currently being kept afloat by $1 trillion in weekly loans. They critique Glenn Beck's "double counting" of overnight loans but agree that the system is on the brink of collapse. The segment highlights the ongoing balance sheet problems of major financial institutions.

FDIC Chairman Sheila Bair issued a warning that the federal deposit insurance fund could become insolvent without increased assessments from member banks. This potential shortfall follows the government's decision to raise the insured deposit limit to $250,000. Critics argue that increased fees will disproportionately harm healthy community banks that did not participate in risky lending practices.

The term "zombie banks" is used to describe insolvent institutions like Citibank that have negative assets but continue to receive government funds. Critics argue these banks should be nationalized or closed by the FDIC, noting that AIG is under investigation for fraud in Great Britain while receiving billions in U.S. aid.