I suspect that were we to apply the standards for problem institutions in effect in 1994 today we would see a far higher number than even this.

It's a bull market in problem institutions - whoohoo!

The bigger problem for US economy and it's purported 'green shoots' recovery is this...."From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent".

1) this 40% number is no longer tenable although Obama and his Wall St bought and paid for economic team are doing their best to try and keep the financial engineering gravy train going at taxpayer expense
2) there will be no return to normal for US economy - those day are over !
3) most Americans should be recalibrating their dream

sheila bair on cramer tells me its all a circus anyway.

more delinquencies, more foreclosures, more distressed sales, more unemployment.

Tonight, Shelia Bair will be on Cramer's Mad Money discussing the state of the US banks.

Will she press the buttons? Because that would be awesome.

"The U.S. banking system is sound" ("KA-CHING!")

"No depositor has ever lost a penny in an FDIC insured bank" ("ALL ABOARD!")

etc.

good thing they have that line of credit

That last chart [reserve %] equals 'cliff diving'... how soon before the diver enters the water and will s/he make a splash?

With that kind of leverage the FDIC must be bring their own SPAM to the BFFs now.

Talk about writing insurance policies that can never be cashed in.

Tonight, Shelia Bair will be on Cramer's Mad Money discussing the state of the US banks. WTF?

The government has be scared to death for some time. You only do things like this when you're scared.

Me thinks the FDIC needs to be put in receivership by the FDIC.

Add in Bank United and the other banks that have failed since 3/31 and the FDIC is near broke.

It's a damned good thing Sheila opened that line of credit with the treasury that she'll never need to use.

I moved cash out of BofA and into a local Credit Union. Their CD's are paying 1.something I complained and they told me that they would meet any rate I found out there. Yesterday I found 2.75% at Ally bank thru Bankrate.com. They matched it!

girlbear (profile) wrote on Wed, 5/27/2009 - 8:39 am
My Brother-I-L is president of a small independant bank in So. Cal. They didn't have much toxic paper...

Consider the possibility that he isn't being fully honest.

Most of the SoCal independents I know are neck deep in commercial and development paper that is currently burning.

My Brother-I-L is president of a small independant bank in So. Cal. They didn't have much toxic paper so they are fine. He told a family member that they have money to loan but they are too scared to loan it out..............

One of the companies I work with said their bank is in a similar situation... their issue isn't that they are reluctant to lend because they fear they won't get paid back - they are concerned the regulatory capital requirements will shift on them [be increased] - if so a lot of 'new loans' would make them deficient. Currently they are fine but if asked to increase their capital a lot with those additional loans and they won't be.

You guys are so boring. The FDIC is an example of a well run corporation, only the best could run at 370.370x leverage and stay afloat. The FDIC is so good, it insures GE's bonds who only managed 135x leverage. If they can get the DIF percentage a bit lower, profitability will be at record levels when the market recovers in 1-7 months

girlbear,
Ally bank is just New GMAC btw

General Motors will be given a lethal injection and put to sleep at midnight tonight. Are there vigils scheduled for the greatest American industrial icon at it's death bed? What will the funeral arrangements be? Will there be any parties I can attend? The event of a passing friend is somewhat deserving of a fitting good buy. Can you please let me know if there will be a memorial service I can attend?

re: Shnaps, last thread?
Who are you? Mocking Rosenberg? Stating there is no shadow inventory, yet having no numbers to back yourself up?

"I'm not an expert, I doubt the FDIC guarantee of PPIP assets is legal."

The rule of law has been suspended for the foreseeable future, didn't you get the memo?

Michael sez: What will the funeral arrangements be?

I think they are following the modern trend toward cremation instead of using valuable land for graves.

Maybe she has a nightstand bazooka?

Rocketman!

Third Morgan Stanley trader is sanctioned - Times Online
A senior trader at Morgan Stanley in London who cheated seven institutional clients was banned for an unspecified period yesterday from working in the City, the third trader at the bank to be outlawed in a fortnight.

Nilesh Shroff, who also was fined £140,000, disadvantaged clients by exploiting knowledge of their planned buy and sell orders to trade in advance for the benefit of the bank, according to the Financial Services Authority (FSA).

3 front runners, from one bank, clipped inside 2 weeks. When does the trust capital account hit overdraft?

EHP: thks for some AM grins.

More on Existing Home Sales and Inventory

When was the last time that happened?

A few years ago.

On the plus side Citi, Bank of America, WaMu, Wachovia never made the list clearly they were all not troubled!

Fund My Mutual Fund: FDIC Troubled Bank List Now 305

Soon to be up on Zacks.com, charts are from CR in this post:

Blog: FDIC fund running dry

As the FDIC has had to step in to take over more and more insolvent banks, the fund has dwindled to dangerously low levels. At the same time the number of problem banks continues to grow at a rapid pace. At the end of the first quarter there were 305 “problem institutions” with a total of $220.0 Billion in assets, up from 252 institutions and $159.4 billion in assets at the end of 2008. At the end of the quarter the Deposit insurance fund was at just $13.0 billion, or 0.27% of insured deposits, a decline of 24.7% in the quarter alone. The first graph (from Blogger: Page not found shows the steep drop in the coverage ratio. Just a year ago, the fund was equal to 1.01% of covered deposits. The current level is its lowest since the first quarter of 1993, when we were digging out from the S&L fiasco. However, don’t worry about losing the money in your checking account if your bank goes under. Congress has already approved a $500 billion line of credit to the FDIC. With out a doubt, that line of credit is going to have to be tapped. This does emphasize the insanity of having the FDIC provide the guarantees for the PPIP program. The fund simply does not have the resources available to do it. The money for the inevitable large losses that the fund will take on the program will come from that line of credit.

The prospect of the FDIC paying back that loan anytime soon from increased assessments on the banks is extremely remote. This is simply a back door bailout of the FDIC, structured as a line of credit so it does not increase the reported budget deficit. Using the FDIC to backstop the PPIP program is simply a way to bypass Congress. There is no way that Congress could not have approved the line of credit and let the FDIC become insolvent. By all rights, the assessments on the banks should be raised to make up for the shortfall in the FDIC, but now is not exactly the time to do it, since it would simply deplete their capital at a time when they desperately need to improve their capital base. To bring the fund up to a more normal 1.2% of insured assets would require $44.8 billion not counting the losses that the fund has incurred so far in the second quarter, or any subsequent losses. That would be a pretty hefty tax for the banks to pay. Still, fairness demands that it be paid by the banks, not by the general taxpayer.

During the quarter, 21 banks with $9.5 billion of assets failed, at an estimated cost to the fund of $2.2 billion. In the 12 months to 3/31/09 there have been 44 failures with $381.4 billion in assets at a total cost to the fund of $20.1 billion. The 5.3% of failed assets cost to the fund over the last year is somewhat misleading since by far the largest failure was Washington Mutual which was bought by J.P. Morgan (JPM) at no cost to the FDIC (but very generously backstopped by the Fed). It is noteworthy that Wamu never showed up on the “problem bank” list. This is a good reminder than not all problem banks fail, and not all failures are identified as problem banks before they go under. The 23.2% cost of failed assets in the first quarter is much more representative of a typical bank failure.

Since the end of the first quarter, 15 more banks have failed, and one Bank United had more assets ($12.8 billion) and cost the fund more ($4.9 billion) than all the failures of the first quarter combined. It is thus very likely that the fund is already approaching a single digit basis point coverage ratio of insured deposits. If we simply subtract out the $4.9 billion from the $13.0 billion at the end of the quarter (very generously assuming that assessments coming in equal the cost of the other 14 smaller failures) the fund is down to just $8.1 billion, or 3.7% of identified problem assets. As commercial real estate tanks, hundreds of smaller banks with massive exposure to it will be in danger of failing. It is very likely that the list of problem banks and their assets will continue to grow. When looking at the second graph (from the FDIC, by way of Blogger: Page not found note that the difference between the last bar and the second to last bar is only a quarter, while the other bars are annual differences. Thus the increase in the assets of problem banks is actually accelerating by increasing $60.6 billion in the first quarter, almost twice the $34.3 billion average increase per quarter during 2008. Similarly, the quarterly increase in the number of problem institutions, 53, is significantly higher than the average quarterly increase during 2008 which was 44. In short, we still have many significant problems in the banking system, and the rate of increase shows no sign of slowing down. While the big boys like Wells Fargo (WFC) and Bank of America (BAC) may be in the process of raising enough capital to repay the TARP, there are many smaller banks which are in deep trouble. While individually they do not pose a systemic risk, collectively they will prove to be a significant drag on any economic recovery.