Hey, anon, I was here first, and as I was typing in multiple words and thus adding content, you sit there and plug in one single word, so really I'm still first...
The huge spike in the '80s was due to the S&L crisis.
fwiw: It might make sense to plot the $$ value of the failed banks instead of number of banks, to account for the fact that the industry is less fractured now than in the 80s.
(Probably already suggested, but just in case.)
Columbia is more typical of the banks that failed in the last cycle. How many times does it need to be repeated that this time is different? Indymac is not an exception. Banks are failing because they made bad loans and/or systemically mis-priced risk. Gee, how many banks does that describe?
If Citi is such bad shape, why don't the options for 2009 and 2010 reflect the risk? Look at Jan '09 Puts for a $5 strike - they are at $0.07 even though C traded for $14! The market doesn't believe there's much danger to Citi.
"Columbian is probably more representative than IndyMac of the type of institutions that will fail in this cycle"
Maybe so, if you are describing the median $ loss value to the FDIC, but not the Avg. That number will be decidedly higher than the median. Just wait for WaMu & WB. They will tip the scales. When, who knows ?
"During the Roaring '20s, 500 bank failures ... depositors typically losing 30% to 40%"
This time people "banked" their homes, and lost 30-40% of their home value, a loss not covered by the FDIC.
Also, note that bank failures rise and peak after the hardship which was not "fairly healthy." Banks are allowed to kick along until after the debris is floating, only then is the mess cleaned up.
Argh! Is there some shortcut to only Google search articles within date ranges? Trying to go 2 months back but it doesn't appear there's anyway to focus the search.
I have to go, but Ill check back in, this seemed like a clue?
Re: All banks that reported total assets of less than $1 billion in their Reports of Condition for June 30 of the
previous year must complete item 1 of this schedule each quarter. Item 1 consists of a "YES" or "NO"
question which asks whether a simplified risk-based capital calculation performed by the reporting bank
resulted in a ratio greater than or equal to eight percent.
Search methodology was a Google Search for the past month of something like "raise capital commercial bank". Since that was giving me too many results I started to add states in the search to get it more focussed...
One of the primary reasons everyone points to the S&L crisis is that it's calming to think few banks have failed recently compared to the 80's. You need to stop and think though about what caused all of the S&L's to fail, which largely was the 1986 Tax Reform Act. The TRA disallowed the deduction of passive losses against ordinary income....allowing only the offset against passive income. Consequently, all of the RE projects of the 80's which were largely tax shelters became worthless. So many financial institutions involved in these deals were rendered immediately insolvent. Throw in Congress' flip-flopping on the inclusion of goodwill into regulatory capital.....and the rest is history.
My point is, the economy was still generally in good shape in the late 80's, while the S&L industry's new business model (again courtesy of Congress) in commercial real estate was taken out.
What I think will be more costly about the current environment is the housing bubble was open to all participants (living or not), whereas most of the CRE deals of the 80's were targeted towards a certain tax bracket. The housing bubble will lead to more CRE problems....just give it time.
Banking problems will likely be more protracted and painful. Look for failures to pick up after the election.
The second quarter net loss was primarily attributed to expenses associated with the implementation of our previously announced Strategic Growth Plan, an increase in our provision for loan losses, and expenses associated with the correction of a prior-period accounting error. The Company again recorded increases in revenue, client deposits and loans, and the number of new clients.
"The second quarter results once again show success in the ongoing implementation of our Strategic Growth Plan and the reported loss reflects the continued investments we're making to position our Company for long-term success,"
It's interesting to note that even with the failure of almost 3,000 banks and thrifts during the S&L crisis, the overall economy stayed fairly healthy with only a mild-to-moderate recession starting in July 1990.
That all depends on your perspective. A very large number of us were not so fortunate. I couldn't find work for a year. I obviously wasn't alone because the federal government passed extensions to unemployment benefits.
On the up side, it was that experience that taught me to live below my means and save for rainy days.
This time people "banked" their homes, and lost 30-40% of their home value, a loss not covered by the FDIC.
home valuations weren't wealth, nor savings; the people who borrowed more than the collateral is marketable now can & should just walk away if their loan is non-recourse.
It's the bag-holders responsibility for lending more than the asset was worth, not the borrower's.
While losing 30% of a paid-off $300,000 home valuation hurts more than 30% of a $5,000 savings account, the former is paper losses of unearned wealth, while the loss of savings is in fact loss of earned wealth in most instances.
Two Tears in a Bucket writes:
One of the primary reasons everyone points to the S&L crisis is that it's calming to think few banks have failed recently compared to the 80's. You need to stop and think though about what caused all of the S&L's to fail, which largely was the 1986 Tax Reform Act.
i think a little correction here is in order on this point. the s&l crisis was not caused by the tax changes in 1986. the s&l industry collapsed because of the cartelization of financial services during the depression and the subsequent debauching of the dollar by the treasury and fed reserve during the 1960s.
thrifts were locked into a narrow business -- make long duration fixed rate mortgage loans (some residential/multi-family construction loans) funded by short duration time deposits and savings deposits (no free demand deposits like banks). when loan rates were 6% and deposits rates were 3%; thrifts had a cushy life until the mid-1970s when intrest rates started to soar because of hyperinflation. thrifts/banks could not raise deposits as teh regulation q limits were hit at 5.5% (banks) & 6% (thrifts). deposits left banks/thrifts and this is when the retail money market fund business got started. congress eventually lifted the reg q limits, but the damage had been done.
at the start of the 1980s, the thrift industry was in the hole by about $30-40b because of the decline in MV of their fixed rate mortgage books (adjustable rate mortgages started in earnest in the late 1970s as thrifts had to off load some rate risk to its customers).
instead of fixing the hole from market risk, congress wanted the thrift industry to grow its way out the hole. thus, they allowed thrifts new powers to make commercial real estate loans. this new form of credit risk was like giving a cocaine addict herion. the tax law change in 1986 did hurt some projects, but it just exposed their non-economic viability. however, the thrift industry was busted even without the tax law change. the results was that a $30-40b problem eventually cost $160b because of congressional meddling, regulatory malfeasance and forbearance, etc. unfortunately, these lessons seem to have been lost and the current crisis is heading down a similar path.
i think a more interesting way to look at the failure numbers from the last crisis is to strip out the thrifts as they failed due to market risk. look solely at the per capita failure rate for commercial banks. the per capita failure rate for commercial banks in this crisis may match it.
I read that because the banks consolidated after the S&L debacle so the failures will be larger in dollar terms but not as many institutions...hopefully?
McCaffree acknowledged that the bank is operating under a July 15 agreement with banking regulators, though the agreement has not been disclosed publicly by regulators.
again, the fdic did not publish this action and it happened less than a month to failure. IMB was not under formal enforcement action before it failed. First Priority was not under formal enforcement action (cease & desist) only under a prompt corrective action. the two national banks that failed were put under formal enforcement actions by the occ less than a month prior to failure.
does anyone see a pattern here?? the regulators are way behind and are only "papering" the file by issuing these orders so close to failure. it also indicates how rapidly the conditions are deteriorating.
a week before IMB failed, bair would have told the world that no major bank would fail. so when she utters these same words today that no other major bank will fail, what is one to believe. clearly the regulators are way behind the curve and if bair's statements are predicated upon info flowing from staff, then we see the quality of that info. an outsider might conclude that bair is being misinformed by staff or she is doing her best baghdad bob impersonation.
I am still trying to wrap my mind around the wachovia marketwatch article.
"Until now, most analysts and investors have focused on Wachovia's $122 billion portfolio of so-called pick-a-pay mortgages, inherited from the infamous acquisition of lender Golden West at the height of the housing boom in 2006. These kinds of negative-amortization mortgages allowed borrowers to pay less than the required monthly amount, increasing the size of the loan. As house prices slump, more of these home loans are souring.
But Wachovia also has more than $200 billion in commercial loans that could trigger even more losses if the U.S. economy slides into recession, according to Cassidy.
"This is more frightening to me because it's bigger," he said."
does the FDIC even have money to bail out wachovia? the list is getting long for bailouts between the FDIC, the Fed and Congress. bear stearns. indymac. fannie and freddie. the car companies. when does it end? keep in mind we are still paying for the S&L bailout.
Absolute numbers of banks is a poor measure over that long a period. Consolidation has drastically changed the landscape. We need a chart of total failures as a percent of total institutions, as well as one showing failures measured by total deposits held in the banks that failed. Otherwise 40 tiny little banks will look far more impressive than one mid-sized regional.
It's fairly obvious to me that this whole fiasco (bank failures) are being minimized so that the next administration will be dealing with it.
This latest one had heavy CRE exposure and it fails now??
The Bushies are hiding them or just refusing to allow them to fail (via strong-arm tactics with the FDIC). It must be something like this:
Phone rings at the FDIC:
"hello?"
"this is (insert the banks we all know should have failed at this point but curiously have not) and we need you're help".
"Since you as (X) have failed to make your minimum "political donation" to your local republican incumbent we are unable to help you until November 7th, 2008. Until that time you can either, raise your own capital (currently going on as we speak) or just not "fail".....please give Robert Steele a call at WB for a crash course in how we want you to operate as a potentially insolvent institution"
This message will self-destruct in 5 seconds.....along with your pension, job, and depositor base if you do not cooperate and enter in the correct number....YOU DO KNOW THE CORRECT NUMBER DON'T YOU???????
Sounds far-fetched however it is indicative of how these people operate and will make the 2000 elections look like a children's picnic.
keep in mind we are still paying for the S&L bailout.
I calculate around $10B this year. Just great. Median income is $40K, taxes around $10K, so that's one million people working to just pay the accrued interest on the S&L payout.
The TRA didn't in an of itself cause the S&L crisis.....it was the third piece of legislation in the train to hell. 1) Monetary Control Act of 1980; 2) Garn-St. Germain Act of 1982 3) and TRA of 1986.
If anyone is interested in the best book on the matter, try reading "The Greatest Ever Bank Robbery" by Martin Mayer. Or you can simply work in the regulatory aspect of financial institutions for 20+ years.
BTW, informal enforcement actions are not published. So any institution under a Memorandum of Understanding would be known as such, only if the institution discloses it via a press release or an SEC filing, if publicly traded. As for the process of issuing a C&D, it is lengthy and contains statutory timeframes that must be followed. Speaking of statutory timeframes, reguators are required to complete their statutorily prescribed examinations or appear before Congress to explain why they weren't acheived. Since you aren't privy to either the examination timeframes or any informal enforcement actions that may have been in effect, there is no merit in conspiratorial theories.
One reason I think failures will go up after the election is the common practice of new bank management in problem situations to clear the books of problem assets. There is an incentive to air everything, and I think we'll see that regardless of who wins the election.
Also, during the S & L crisis, weren't a lot of the failures single branches, especially in Texas, et. al.? That being so, what if WaMu were to go under. That would be one bank, but 100s of branches. Apples and oranges?
It's interesting to note that even with the failure of almost 3,000 banks and thrifts during the S&L crisis, the overall economy stayed fairly healthy with only a mild-to-moderate recession starting in July 1990.
Uhm, try telling that to the people in the oil belt states (TX, OK, LA), where the housing market and employment collapsed.
In places like Texas and Tennessee, if one "bank" went down, then 20 banks went down as they were part of the same ownership structure.
So comparing the number of banks that go down is not very comparable in my opinion.
I'd rather see total assets of banks that went under and total assets as a percentage of GDP that went under. I think that would make for a better comparison. But whether that data is available or not, I don't know....
John Maudlin said the problem goes far beyond GSEs Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). He also predicted that we will have to deal with the aftermath of a rather large number of bank failures over the next year, which is likely to overwhelm the ability of the FDIC to insure your bank deposits.
primero?
First?
I am the ruler
Hey, anon, I was here first, and as I was typing in multiple words and thus adding content, you sit there and plug in one single word, so really I'm still first...
Oh, geez.
I am the ruler is content?
Go eat squirrel!!
The huge spike in the '80s was due to the S&L crisis.
fwiw: It might make sense to plot the $$ value of the failed banks instead of number of banks, to account for the fact that the industry is less fractured now than in the 80s.
(Probably already suggested, but just in case.)
What is the comparison of $ assets in the failed banks (weighed avg.)? Are the banks in bankruptcy much larger than during the S&L crisis?
That article looks familiar. (grunt)
Columbia is more typical of the banks that failed in the last cycle. How many times does it need to be repeated that this time is different? Indymac is not an exception. Banks are failing because they made bad loans and/or systemically mis-priced risk. Gee, how many banks does that describe?
Gee, how many banks does that describe?
If C goes, and it very well could, we only need to find 1 to see the China Syndrome happen -- total market meltdown.
Well, not meltdown per se, I lack the expertise and study to predict what a post-Citi world would look like, but it wouldn't be good.
Troy,
It's a question of timing...the good thing that is...
If Citi is such bad shape, why don't the options for 2009 and 2010 reflect the risk? Look at Jan '09 Puts for a $5 strike - they are at $0.07 even though C traded for $14! The market doesn't believe there's much danger to Citi.
Well the reason I don't own those $5 Puts on Citi is because I am afraid Ben will work out a deal and keep Citi from going to $5.
"Columbian is probably more representative than IndyMac of the type of institutions that will fail in this cycle"
Maybe so, if you are describing the median $ loss value to the FDIC, but not the Avg. That number will be decidedly higher than the median. Just wait for WaMu & WB. They will tip the scales. When, who knows ?
Gee, how many banks does that describe?
Dawg, what's the current troubled bank list looking like? In particular, I'm most curious about California and East Coast institutions.
Got Popcorn?
Neil
"During the Roaring '20s, 500 bank failures ... depositors typically losing 30% to 40%"
This time people "banked" their homes, and lost 30-40% of their home value, a loss not covered by the FDIC.
Also, note that bank failures rise and peak after the hardship which was not "fairly healthy." Banks are allowed to kick along until after the debris is floating, only then is the mess cleaned up.
Re: Go eat squirrel!!
Are you inviting me on a date?
Using Google looking for banks raising capital in the past month, especially articles that invoke the OTS:
American Sterling Bank, $1.5M to meet standards required by OTS
Of course everyone knows about Downey.
So I guess those two are next?
Argh! Is there some shortcut to only Google search articles within date ranges? Trying to go 2 months back but it doesn't appear there's anyway to focus the search.
Hey YLSP,
Try some of this crap:
SCHEDULE RC-R -- REGULATORY CAPITAL
http://www.fdic.gov/regulations/resources/call/crinst/999rc-r.pdf
I have to go, but Ill check back in, this seemed like a clue?
Re: All banks that reported total assets of less than $1 billion in their Reports of Condition for June 30 of the
previous year must complete item 1 of this schedule each quarter. Item 1 consists of a "YES" or "NO"
question which asks whether a simplified risk-based capital calculation performed by the reporting bank
resulted in a ratio greater than or equal to eight percent.
Found some more:
Freedom Bank, raising $15M from investors through agreement with Community Bank Investors America
Regions Financial Corp (Alabama's Biggest), $2B to compenate for wider losses
Silver State Bancorp (Henderson Bank?), "all capital raised in 1Q is under water" (!!!)
Search methodology was a Google Search for the past month of something like "raise capital commercial bank". Since that was giving me too many results I started to add states in the search to get it more focussed...
Didn't realize haloscan limited the number of hyper-links in a comment... hrump...
3 more:
Strata Bank, investor quoted in article pissed off...
TowneBank (Virginia), plans to raise $30M end of July... anyone think that worked??
Granite Community Bank, invested heavily in Sacramento area CRE...
Note: I'm not saying these banks are going to fail, just some of these banks have been in the news recently as needing to raise capital.
One of the primary reasons everyone points to the S&L crisis is that it's calming to think few banks have failed recently compared to the 80's. You need to stop and think though about what caused all of the S&L's to fail, which largely was the 1986 Tax Reform Act. The TRA disallowed the deduction of passive losses against ordinary income....allowing only the offset against passive income. Consequently, all of the RE projects of the 80's which were largely tax shelters became worthless. So many financial institutions involved in these deals were rendered immediately insolvent. Throw in Congress' flip-flopping on the inclusion of goodwill into regulatory capital.....and the rest is history.
My point is, the economy was still generally in good shape in the late 80's, while the S&L industry's new business model (again courtesy of Congress) in commercial real estate was taken out.
What I think will be more costly about the current environment is the housing bubble was open to all participants (living or not), whereas most of the CRE deals of the 80's were targeted towards a certain tax bracket. The housing bubble will lead to more CRE problems....just give it time.
Banking problems will likely be more protracted and painful. Look for failures to pick up after the election.
Here YLSP,
It's a growth plan now.. ROTFLMAO:
The second quarter net loss was primarily attributed to expenses associated with the implementation of our previously announced Strategic Growth Plan, an increase in our provision for loan losses, and expenses associated with the correction of a prior-period accounting error. The Company again recorded increases in revenue, client deposits and loans, and the number of new clients.
"The second quarter results once again show success in the ongoing implementation of our Strategic Growth Plan and the reported loss reflects the continued investments we're making to position our Company for long-term success,"
http://www.earthtimes.org/articles/show/privatebancorp-reports-second-quarter-2008-results,484101.shtml
Was it me or did visitors online just jump from something like 23 up to 40 in a matter of a couple of minutes?
Ahh... there was a new post...
It's interesting to note that even with the failure of almost 3,000 banks and thrifts during the S&L crisis, the overall economy stayed fairly healthy with only a mild-to-moderate recession starting in July 1990.
That all depends on your perspective. A very large number of us were not so fortunate. I couldn't find work for a year. I obviously wasn't alone because the federal government passed extensions to unemployment benefits.
On the up side, it was that experience that taught me to live below my means and save for rainy days.
This time people "banked" their homes, and lost 30-40% of their home value, a loss not covered by the FDIC.
home valuations weren't wealth, nor savings; the people who borrowed more than the collateral is marketable now can & should just walk away if their loan is non-recourse.
It's the bag-holders responsibility for lending more than the asset was worth, not the borrower's.
While losing 30% of a paid-off $300,000 home valuation hurts more than 30% of a $5,000 savings account, the former is paper losses of unearned wealth, while the loss of savings is in fact loss of earned wealth in most instances.
Two Tears in a Bucket writes:
One of the primary reasons everyone points to the S&L crisis is that it's calming to think few banks have failed recently compared to the 80's. You need to stop and think though about what caused all of the S&L's to fail, which largely was the 1986 Tax Reform Act.
i think a little correction here is in order on this point. the s&l crisis was not caused by the tax changes in 1986. the s&l industry collapsed because of the cartelization of financial services during the depression and the subsequent debauching of the dollar by the treasury and fed reserve during the 1960s.
thrifts were locked into a narrow business -- make long duration fixed rate mortgage loans (some residential/multi-family construction loans) funded by short duration time deposits and savings deposits (no free demand deposits like banks). when loan rates were 6% and deposits rates were 3%; thrifts had a cushy life until the mid-1970s when intrest rates started to soar because of hyperinflation. thrifts/banks could not raise deposits as teh regulation q limits were hit at 5.5% (banks) & 6% (thrifts). deposits left banks/thrifts and this is when the retail money market fund business got started. congress eventually lifted the reg q limits, but the damage had been done.
at the start of the 1980s, the thrift industry was in the hole by about $30-40b because of the decline in MV of their fixed rate mortgage books (adjustable rate mortgages started in earnest in the late 1970s as thrifts had to off load some rate risk to its customers).
instead of fixing the hole from market risk, congress wanted the thrift industry to grow its way out the hole. thus, they allowed thrifts new powers to make commercial real estate loans. this new form of credit risk was like giving a cocaine addict herion. the tax law change in 1986 did hurt some projects, but it just exposed their non-economic viability. however, the thrift industry was busted even without the tax law change. the results was that a $30-40b problem eventually cost $160b because of congressional meddling, regulatory malfeasance and forbearance, etc. unfortunately, these lessons seem to have been lost and the current crisis is heading down a similar path.
i think a more interesting way to look at the failure numbers from the last crisis is to strip out the thrifts as they failed due to market risk. look solely at the per capita failure rate for commercial banks. the per capita failure rate for commercial banks in this crisis may match it.
I read that because the banks consolidated after the S&L debacle so the failures will be larger in dollar terms but not as many institutions...hopefully?
this is interesting from the story:
McCaffree acknowledged that the bank is operating under a July 15 agreement with banking regulators, though the agreement has not been disclosed publicly by regulators.
again, the fdic did not publish this action and it happened less than a month to failure. IMB was not under formal enforcement action before it failed. First Priority was not under formal enforcement action (cease & desist) only under a prompt corrective action. the two national banks that failed were put under formal enforcement actions by the occ less than a month prior to failure.
does anyone see a pattern here?? the regulators are way behind and are only "papering" the file by issuing these orders so close to failure. it also indicates how rapidly the conditions are deteriorating.
a week before IMB failed, bair would have told the world that no major bank would fail. so when she utters these same words today that no other major bank will fail, what is one to believe. clearly the regulators are way behind the curve and if bair's statements are predicated upon info flowing from staff, then we see the quality of that info. an outsider might conclude that bair is being misinformed by staff or she is doing her best baghdad bob impersonation.
I am still trying to wrap my mind around the wachovia marketwatch article.
"Until now, most analysts and investors have focused on Wachovia's $122 billion portfolio of so-called pick-a-pay mortgages, inherited from the infamous acquisition of lender Golden West at the height of the housing boom in 2006. These kinds of negative-amortization mortgages allowed borrowers to pay less than the required monthly amount, increasing the size of the loan. As house prices slump, more of these home loans are souring.
But Wachovia also has more than $200 billion in commercial loans that could trigger even more losses if the U.S. economy slides into recession, according to Cassidy.
"This is more frightening to me because it's bigger," he said."
does the FDIC even have money to bail out wachovia? the list is getting long for bailouts between the FDIC, the Fed and Congress. bear stearns. indymac. fannie and freddie. the car companies. when does it end? keep in mind we are still paying for the S&L bailout.
How would someone go about checking the risk level of their own bank?
Absolute numbers of banks is a poor measure over that long a period. Consolidation has drastically changed the landscape. We need a chart of total failures as a percent of total institutions, as well as one showing failures measured by total deposits held in the banks that failed. Otherwise 40 tiny little banks will look far more impressive than one mid-sized regional.
It's fairly obvious to me that this whole fiasco (bank failures) are being minimized so that the next administration will be dealing with it.
This latest one had heavy CRE exposure and it fails now??
The Bushies are hiding them or just refusing to allow them to fail (via strong-arm tactics with the FDIC). It must be something like this:
Phone rings at the FDIC:
"hello?"
"this is (insert the banks we all know should have failed at this point but curiously have not) and we need you're help".
"Since you as (X) have failed to make your minimum "political donation" to your local republican incumbent we are unable to help you until November 7th, 2008. Until that time you can either, raise your own capital (currently going on as we speak) or just not "fail".....please give Robert Steele a call at WB for a crash course in how we want you to operate as a potentially insolvent institution"
This message will self-destruct in 5 seconds.....along with your pension, job, and depositor base if you do not cooperate and enter in the correct number....YOU DO KNOW THE CORRECT NUMBER DON'T YOU???????
Sounds far-fetched however it is indicative of how these people operate and will make the 2000 elections look like a children's picnic.
Ciao
MS
A date? What's that? I have been married for 42 years.
Well Curious
As I learned from a previous thread about indymac probably; there's this.
FFIEC UBPR Home Page
However being financially illiterate I find the reports to be the rough equivalent of Chinese arithmetic.
Maybe you'll have better luck.
keep in mind we are still paying for the S&L bailout.
I calculate around $10B this year. Just great. Median income is $40K, taxes around $10K, so that's one million people working to just pay the accrued interest on the S&L payout.
Re: A date? What's that?
You know, an on-line date, where we chat about the weather and then agree to never do it again..
"...instead of fixing the hole from market risk, congress wanted the thrift industry to grow its way out the hole...
-SurferDude
YouTube -
Fixing a Hole where the Rain gets in...Stops my Mind from Wondering where it will go....
SurferDude,
The TRA didn't in an of itself cause the S&L crisis.....it was the third piece of legislation in the train to hell. 1) Monetary Control Act of 1980; 2) Garn-St. Germain Act of 1982 3) and TRA of 1986.
If anyone is interested in the best book on the matter, try reading "The Greatest Ever Bank Robbery" by Martin Mayer. Or you can simply work in the regulatory aspect of financial institutions for 20+ years.
BTW, informal enforcement actions are not published. So any institution under a Memorandum of Understanding would be known as such, only if the institution discloses it via a press release or an SEC filing, if publicly traded. As for the process of issuing a C&D, it is lengthy and contains statutory timeframes that must be followed. Speaking of statutory timeframes, reguators are required to complete their statutorily prescribed examinations or appear before Congress to explain why they weren't acheived. Since you aren't privy to either the examination timeframes or any informal enforcement actions that may have been in effect, there is no merit in conspiratorial theories.
One reason I think failures will go up after the election is the common practice of new bank management in problem situations to clear the books of problem assets. There is an incentive to air everything, and I think we'll see that regardless of who wins the election.
Also, during the S & L crisis, weren't a lot of the failures single branches, especially in Texas, et. al.? That being so, what if WaMu were to go under. That would be one bank, but 100s of branches. Apples and oranges?
Cut off the taxpayer funded off balance sheet accounting and a whole heckofalotof banks would be failing.
It's interesting to note that even with the failure of almost 3,000 banks and thrifts during the S&L crisis, the overall economy stayed fairly healthy with only a mild-to-moderate recession starting in July 1990.
Uhm, try telling that to the people in the oil belt states (TX, OK, LA), where the housing market and employment collapsed.
In places like Texas and Tennessee, if one "bank" went down, then 20 banks went down as they were part of the same ownership structure.
So comparing the number of banks that go down is not very comparable in my opinion.
I'd rather see total assets of banks that went under and total assets as a percentage of GDP that went under. I think that would make for a better comparison. But whether that data is available or not, I don't know....
John Maudlin said the problem goes far beyond GSEs Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). He also predicted that we will have to deal with the aftermath of a rather large number of bank failures over the next year, which is likely to overwhelm the ability of the FDIC to insure your bank deposits.
This Is the Ninth Bank to Fail This Year How Many More to Go?