It really puts it into perspective that last year this time, this troubled bank list was only at half the size it is today. This happened in the backdrop of a supposed recovery. We are at 118 bank closures for 2010 on track to hit 150 by years end. We are going to have a bumpy fall. Good luck!
CNN - The government’s list of troubled banks hit its highest level since 1993 during the second quarter, although the pace of growth continued to slow, according to a government report released Tuesday.
Five more bite the dust over the weekend. Our total for 2010 to a whopping 78 banks put into receivership by the Federal Deposit Insurance Corporation or FDIC. The banks ranged from Florida, Nevada and California. They collectively cost the insurance fund $317 million dollars. As reported by AP, the fund will be depleted $100 billion dollars by 2016. With there no incentive to over-report these numbers, we can be safe to say that it will be much more than that once all the final numbers come in.
Banks are now pre-paying two years of deposit insurance premiums. That is not a good sign, it shows that many more failures are expected before this expanding crisis is over. The problem list has also expanded to 775 banks, these are banks that the FDIC are monitoring closely to see if their liabilities outstrip the assets on there respective balance-sheets.
That is a staggering figure, 1 in 11 banks are at risk of failing in this country. Even though the media and politicians keep talking about a recovery, the facts on the ground support that we are not out of the woods. We still have plenty of debt in our financial system that is over-valued and needs to be written down or defaulted and until that happens we will not be able to let our normal economic indicators works as they would like having normal rates of interest without massive government programs that are backing much of our financial industry.
CNN, New York - More than 700 banks, or nearly one out of every 11, are at risk of going under, according to a government report published Tuesday.
The Federal Deposit Insurance Corp. said that the number of banks on its so-called “problem list” climbed to 702, its highest level since June 1993.
Having AmTrust fail is pretty major being they had $12 billion in asset when the FDIC put them into receivership. According to the AP release, AmTrust losses were connected to exposure to loans connected to land deals and construction developments. FDIC has been telling Congress that its deposit insurance fund is dangerously low if not already negative. This failure alone is going to cost the fund $2 billion dollars. According to the release, the FDIC still has $21 billion in a separate reserve fund and a $500 billion dollar credit line from the U.S. Treasury.
We are not out of the woods yet. We crossed the 100 bank failure mark this year. A total of seven banks had their door shut this Friday according to the FDIC. As of August, the FDIC still has 416 banks on their “watch list” so it is likely we will see more failures in 2009 and 2010 if not longer. Here is a troubling statement made in this Bloomberg article that discusses the term “zombie bank” which refers to a bank that is basically insolvent but have still not been shut down.
The number of bank closings would likely be higher this year if the FDIC’s fund wasn’t depleted and if the agency had more bank examiners, RBC’s Cassidy said. The agency shrank under President George W. Bush before adding employees in the Obama administration. The FDIC has about 6,000 employees now, compared with 21,000 during the savings-and-loan crisis in 1991, he said. “We certainly know there are hundreds and hundreds of zombie banks out there,” Cassidy said. “The only alternative for them is to be seized and it’s only a matter of manpower and money before they get to it.”
Lately, the FDIC has had its deposit insurance stressed because of these numerous bank failures, they have raised the premiums they charged banks to securing part of their deposits.