Jay Leno may joke about tracking the path of a hurricane by tracing the area of insurance cancellations prior to the storm season, but when Kansas Bankers Surety, (a Berkshire Hathaway company since 1996) eliminates private bank deposit insurance for deposits exceeding FDIC protection, need I say more?

On 7 September 2008 the FDIC had information “For immediate release”, assessing the risk to thrifts and banks exposed after the takeover of Fannie Mae and Freddie Mac. Does it seem unusual that the FDIC releases information as sensitive as the vulnerability of bank and thrift investment holdings on a Sunday and 2 days later banks get cancellation notices for extended coverage?

Public information officer Bob Hanson reports that an examination of Kansas Bankers Surety showed the company was “strong” and financially sound. “It’s a pure business decision from what we understand,” said Hanson.

Private bank insurance is contracted by banks to protect deposits that exceed FDIC insurance protection. While the policies are not negotiated directly with depositors, banks contract for additional insurance to protect the accounts of larger depositors and businesses. Premium rates vary based on the financial condition of the banks as assessed by Kansas Bankers Surety. Apparently the Berkshire Hathaway company sees supplemental bank insurance as “bad business”.

11 banks have failed so far this year. With more than 3 months to go this year, it already equals the number of bank closures in 2002. I do not know if Kansas Bankers Surety insured any of the failed banks, but five of the banks were in the Midwest. 2 of the banks were in Missouri, 1 bank in Kansas, 1 bank in Arkansas, and 1 bank in Minnesota.