Posted tagged ‘FDIC’

Record Nine Bank Failures Yesterday

October 31, 2009

2228036852_f9705e9266The FDIC shuttered nine banks on Oct. 30, 2009, bringing the total for the year so far to 115.

Yesterday’s closures will cost the FDIC an estimated $2.5 billion, combined.

According to an AP report (via Clusterstock):

Regulators shut California National Bank of Los Angeles and eight other banks as the weak economy continues to produce a stream of loan defaults.

The banks closed by the Federal Deposit Insurance Corporation were in California, Illinois, Texas and Arizona. They were divisions of privately held FBOP Corp., a Chicago-based bank holding company.

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have cascaded and sapped billions out of the deposit insurance fund. It has fallen into the red.

Failures have been especially concentrated in California, Georgia and Illinois. While the pounding from losses on home mortgages may be nearing an end, delinquencies on commercial real estate loans remain a hot spot of potential trouble, regulators say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks, especially, hold large concentrations of these loans.

The 115 failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $25 billion so far this year, and hundreds more bank failures are expected to raise the cost to around $100 billion through 2013.

The 115 bank failures this year compare with 25 last year and three in 2007.

The number of banks on the FDIC’s confidential “problem list” jumped to 416 at the end of June from 305 in the first quarter. That’s the most since June 1994. About 13 percent of banks on the list generally end up failing, according to the FDIC.

Also, be sure to check out this interactive visual of recent bank failures from the Wall Street Journal. The graphics are great. They really help put the whole mess in perspective.

Bank Failures in 2009 Reach 100

October 23, 2009

closed_bankThe FDIC shut down Partners Bank of Naples, FL today, raising the total number of failed banks in 2009 to 100.

 Back in August, the size of the banking crisis during this “Great Recession” had already far surpassed the Great Depression. But even with 100 banks now down, there are still hundreds more about to fail.

 How is your bank doing?

Update:

  Three more banks added to the list (so far) since #100.

 Anticipated costs to the FDIC (aka taxpayers) for today’s closures:

 Partners Bank                  $28.6 million
American United Bank  $44 million
Hillcrest Bank Florida   $45 million
Flagship National Bank $59 million 

Total…. $176.6 million. Which is actually not much, relatively speaking. Costs have been far higher when larger banks were closed.

Update II:

Add three more since the last update, a new grand total of 106 failed banks this year.

Bank of Elmwood $101.1 million
Riverview Community Bank $20 million
First DuPage Bank $59 million

Bringing the estimated FDIC cost to $356.7 million today.

Five More Failed Banks

September 5, 2009

045-0904063502-house-of-cards-sThe FDIC took over five more banks yesterday, bringing the total number of failed banks for this year to eighty-nine.

What’s Bigger Than Too Big To Fail?

August 28, 2009

From The Washington Post:  

greengiantBanks ‘Too Big to Fail’ Have Grown Even Bigger

A year after the near-collapse of the financial system last September, the federal response has redefined how Americans get mortgages, student loans and other kinds of credit and has made a national spectacle of executive pay. But no consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected.
“It is at the top of the list of things that need to be fixed,” said Sheila C. Bair, chairman of the Federal Deposit Insurance Corp. “It fed the crisis, and it has gotten worse because of the crisis.”

Moral hazard alert level: Red.

Failed Bank List Grows to Eighty-One

August 22, 2009

001-0820064521-Bank-CollapseThis week four more banks joined the FDIC failed bank list, including the second largest of the year – Guaranty Bank of Austin, Texas.

The others are ebank Atlanta, Georgia, CapitalSouth Bank, Birmingham, Alabama and First Coweta, Newnan, Georgia.

While Ben Bernanke may believe recovery is just around the corner, there are still some rather large red flags on the horizon.

McClatchy reports the following:

Delinquency and foreclosure rates for U.S. mortgages continued to rise in the second quarter, with loans to the most qualified borrowers going bust at an unnerving clip, especially in hard-hit states such as Florida and California.The numbers reported Thursday by the Mortgage Bankers Association show clearly that rising job losses are worsening the nation’s housing troubles and threaten the Obama administration’s efforts to keep owners from losing their homes.

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The Orlando Business Journal also reported Friday that as of June 30th, “Nationwide, a total of $3.4 trillion worth of property values was in risk of defaulting.”  That’s right – $3.4 Trillion worth of loans at risk of default.

Guaranty Financial Group was crippled not by engaging in overly risky practices but because it bought highly rated, straightforward structured mortgage-backed securities. It lent to home builders. Both of these things were what it specialized in, it’s “core compenentcy,” as it’s CEO puts it. They didn’t buy subprime loans, and didn’t buy much of the super-toxic 2006 and 2007 loans. They thought they would be safe. And they were wrong.

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Did we all get it wrong? Calculated Risk has charts of US mortgages by type and loans that are seriously delinquent or in foreclosure by type. The disturbing thing about the second chart is that it clearly shows the crisis has expanded to the Prime loan market in great numbers.

With so many loans defaulting, the list of problem banks remains large. Banking analyst Meredith Whitney predicts more than 300 banks will fall soon. See Calculated Risk for an unofficial list of problem banks.

Where does all this leave the FDIC? Once again, Calculated Risk provides some very informative charts pertaining to estimated losses to the FDIC. And Karl Denninger lays it all out in The Market Ticker – “about 75% of the FDIC’s “insurance fund” has been depleted over the last year.” So is the FDIC broke? Karl think so.

I believe the FDIC is broke and knows it; that under the law they should have seized these three banks (and many dozens more, including some really big ones) some time ago, but doing so will force them to tap the Treasury “emergency” credit line. They’re well-aware that this could instill quite a bit of panic in the public (never mind Congress!); as such they, along with OTS and OCC are conspiring to (once again) hide the truth and pray for an economic recovery before they are forced to act as the law demanded months or even years ago!

A new quarterly report from the FDIC is due out soon. Perhaps that will shed more light on the situation. Or not. Stay tuned.

Another Big FDIC Friday

August 15, 2009

2228036852_f9705e9266Five more banks on the FDIC failed bank list yesterday, including the biggest bank failure of the year so far – Colonial BancGroup Inc. of Alabama.

Bad enough, but it could get much worse. Bloomberg is also reporting that another 150 banks may have “a deadly toxic asset problem“.

Another Big FDIC Friday

August 3, 2009

 Friday, July 31st, 2009.

Five new failed banks on the FDIC list.

Sixty-nine for the year so far and counting with some big banks on the precipice.

Seven More Bank Failures This Week

July 26, 2009

bank_07According to the FDIC’s Failed Bank List, seven more banks failed this week bringing the total for this year to an astounding sixty-four.

That makes more than twice as many as last year (26) and more than 21 times as many as in 2007 when just three banks failed.

And just think – it’s only July. We still have just over five months left to go in 2009. It is entirely within the realm of possibility that 100 or more banks could fail this year. Doesn’t look like green shoots from here.

Biggest Bank Failure of the Year Today

May 22, 2009

004-0123231011-money_burningThe biggest bank failure of 2009 (so far) happened today when the FDIC shut down and took control of BankUnited of Florida. It is also the biggest bank failure since IndyMac.

After several tense days, during which Florida bank BankUnited scrambled to raise capital or sell itself, it has been shut down, put into receivership and sold to investors that include Wilbur Ross and the Carlyle Group.

It is the biggest bank failure of 2009 and it will cost the stretched FDIC $4.9 billion.

The FDIC’s full announcement is here.

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[emphasis added]

April Economic Picture

May 4, 2009

Corporate Earnings

First quarter corporate earnings statements were released throughout April. Here are the ones I caught as they were announced:

Losses

3M 1st-quarter profit slips 48%
Altria Group 1Q profit drops, but beats view
AMD posts deeper loss, shares fall
AmEx 1Q profit drops 63 percent
AT&T earnings fall
Boeing posts 50 pct decline in 1Q profit
CAT reports first loss since ’92, cuts forecast
Charles Schwab 1Q earnings fall 29 percent
Chevron 1Q profit falls 64 pct
Coca-Cola 1st-quarter profit falls
ConocoPhillips says profit down 80 percent
Delta posts $794 million 1Q loss
Dow Chemical 1Q profit drops 97 percent
DuPont 1Q profit falls, cuts outlook
EBay 1st-qtr profit, sales fall on weak economy
Exxon profit sinks on slumping oil demand
Gannett 1Q profit tumbles as ad declines deepen
GE Q1 earns fall 36 pct, hurt by finance
Kodak posts wider 1Q loss, suspends dividend
MasterCard 1Q profit falls 18 pct
Mattel posts wider loss in 1st quarter
Merck sees 57 percent drop in first-quarter profit
Morgan Stanley loses $578M in 1st quarter
New York Times posts quarterly loss
Nokia profit plunges 90 percent in Q1
Pfizer profit dips 2 percent, sales fall much more
Procter & Gamble profit falls as consumers cut back
Shell 1Q profit down 62 percent
Sony Ericsson posts loss, to cut 2,000 jobs
Southwest Airlines posts 1Q loss
Time-Warner post 1Q loss
Toshiba expects bigger loss, contract job cuts
UPS 1Q profit plunges more than 55 pct
US Bancorp’s 1Q profit falls, but beats estimates
Whirlpool 1Q profit drops on weakening demand
Yahoo Posts 78% Profit Drop, Cuts Jobs

Gains

Amazon 1Q profit, revenue jump on strong sales
Bank Of America Posts $4.2 Billion Profit
Citi Posts A Profit
Goldman $1.66B 1Q earns beat Wall Street estimates

Google Solid Q1
Humana 1Q profit more than doubles
Microsoft Earnings Weak, But No Disaster
Netflix post solid Q1 sales
Pre-Easter bounce helps lift Hershey 1Q profit
Verizon 1st-qtr profit, revenue beat expectations
Wells Fargo Announces Strong Earnings

Don’t get too excited about those bank profits, though. Bank earnings are actually very weak so far. It’s all just accounting magic, mostly due to the FASB suspension of the mark-to-market rule. Wells Fargo made billions on the mark-to-market change. Goldman’s big numbers are also mostly meaningless.

But don’t take it from me. Here’s former bank regulator and current University of Missouri – Kansas City economics professor William Black:

Banking

Since William Black talked about the stress tests in the above video, let’s start with that topic.

As posted previously, the stress tests are asinine for a number of reasons, not the least being that they are designed by the same geniuses who did not see the housing bubble burst coming. Meaningless as they are, however, they did generate a lot of news in April.

Early in the month we were told that all 19 of the nation’s largest banks passed the stress test. But we couldn’t be certain of that because the Fed ordered all the banks to keep silent about their results.

By the end of April there was a leak. The whisper was that Citi and Bank of America actually failed the stress test and both were being told to raise more capital.

The next day, word was that six banks failed the stress test and now need to raise funds. And now, as of today, Bloomberg is reporting that 14 of the 19 stress tested banks are in trouble.

But there’s nothing to worry about – if you’re a bankster, that is.

The Fed says the 19 companies that hold one-half of the loans in the U.S. banking system won’t be allowed to fail — even if they fared poorly on the stress tests.

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004-0123231011-money_burningA source at Treasury said no banks will close based on stress test results. None, even though Citi needs $10 billion more bailout dollars and Bank of America needs $70 billion more.

After several delays, stress test results will be released Thursday, May 7.

 

Failed Banks

Eight banks were added to the FDIC failed bank list in April, bringing the current total for this year to 29 and surpassing the total of 25 for all of 2008. Also in 2008, only 2 banks had failed by April. This means that bank failures are up more than 1000% this year.

sheilabair-sad_tbi-0_74x0_74With so many banks already seized by the FDIC this year, some are wondering, who’s going to bail out the FDIC?

 

Credit Card Crisis

It was only a matter of time before credit card defaults and other concerns bubbled up to the top of the news.

The Greatest Credit Card Debt Plunge Ever

Consumer credit plunged far faster than expected in February, with Americans taking on far less credit card debt.  Credit card debt fell at an annual rate of $7.8 billion, or 9.7 percent. That is the sharpest drop in dollar terms ever (although the records only go back to 1968.) It’s the  steepest percentage fall since 1978.

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Capital One says their current credit card default rate is 8.4% and it is expected to “surge past 10%”.

It should be no surprise that millions of unemployed people are finding it difficult to make their credit card payments. That’s just common sense. And yet, Citibank said higher unemployment won’t lead to credit card losses.

TARP

What was the idea behind the TARP program again? To help banks get back to lending money? So much for that plan. The banks are now lending even less than when the TARP was first launched.

The entire TARP program is becoming very unpopular with the very banks it was supposedly designed to help. Some banks that took (or were forced to take) TARP funds want to pay it back in order to get out from under the government’s thumb. Although Treasury Secretary Geithner doesn’t want the banks to repay TARP, he may not have any legal means to refuse them.

You can’t blame the banks that are healthy enough on their own for wanting to be left alone. Citi has had to go to Treasury to ask permission to pay retention bonuses. The discussion is ongoing.

It’s all about control.

Treasury

geithner3Treasury reported in April that it still has about $110 billion of the original $700 billion bailout fund. Expect that to be used up by the banks that need more capital based on their stress test results.

If the TARP bailout money is almost gone, why is Geithner refusing to let banks pay back the TARP funds they got? Weren’t the taxpayers supposed to be repaid as soon as the banks could manage it?

PPIP

The long-awaited Geithner plan for dealing with legacy securities toxic assets is doing, well, nothing really. Potential investors have shied away, with good reasons. So the deadline for investment applications was extended and the requirements for applicants were loosened.

As of April 29, 2009, Treasury is proud to announce over 100 applications to participate have been received. Wow.

Expanding TARP?

Early in April, Treasury announced it may expand TARP to bail out life insurance companies. It’s a plan scam that helps only bondholders, period.

Fraud?

Say it ain’t so! Neil Barofsky, special inspector general for the TARP, has already launched twenty investigations into possible securities fraud, tax violations, insider trading and other crimes related to the bailout funds.

In the 250-page report Barofsky submitted to Congress he also expressed serious concerns about Treasury’s latest bailout propgram, the PPIP. As Reuter’s blogger Felix Salmon observed, “not only is Barofsky worried about PPIP participants gaming the system, he’s also worried that the whole thing could easily become a front for money launderers”.

Federal Government

000-0404012252Q1 GDP -6.1%.

Budget

Congress passed the $3.5 trillion budget proposed by President Obama, “a level of spending over 10% more than the final year of the Bush administration… [with] almost all of Obama’s wish lists intact.”

President Obama has also asked Congress for a supplemental spending package of $83.4 billion for the wars in Iraq and Afghanistan.

With the largest budget in history passed and two ongoing wars to fund, we learned that the federal budget deficit grew to a record $956.8 billion while federal tax receipts are off 28%.

Revenue

The federal government ran out of cash on Sunday, April 26th, making this the earliest “debt day” ever. With no cash on hand and tax revenue shrinking at an alarming rate, federal borrowing quadrupled.

But the President wants you to know he’s serious about cutting the deficit and spending responsibly. That’s why he ordered his Cabinet to cut $100 million from their combined budgets in the next 90 days. Translated into numbers more like the ones you and I deal with on a daily basis, that’s like cutting “a latte or two out of your annual budget“.

As my dear granny would have said, “oh boy, could you spare it?”

Bailouts

The Congressional Budget Office raised its estimate of what the bailouts will cost taxpayers. As of April 4, the new estimate is $356 billion ($167 billion more than earlier estimates).

Surprise

“And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.” – Sen. Dick Durbin of Illinois

Retail and Commercial Real Estate

3ff5d97338b1d48cMarch retail sales overall fell 1.8 percent. Excluding Wal-Mart, sales fell 5 percent. And Wal-Mart itself saw less of an increase than expected at 1.4 percent in March.

“Strip malls, neighborhood centers and regional malls are losing stores at the fastest pace in at least a decade” and “ghost malls are scaring suburbs“. Commercial real estate defaults quintupled.

The second largest US mall owner, General Growth, declared bankruptcy in April.

On a somwhat related note, office vacancies rose to 12.5 percent in Q1 – the highest they’ve been in three years.

US Auto Industry

Auto sales fell to near 30-year lows in April.

Chrysler

Chrysler

Chrysler made the President happy when it filed for Chapter 11 bankruptcy at the end of April. This means Chrysler will get another $8 billion of taxpayer money to help them “restructure”.

But not everyone is happy with the bankruptcy terms Chrysler proposed.  A group of non-TARP senior hedge fund creditors are fighting to get their clients the settlement they are legally due in a bankruptcy situation. These creditors did not make the President happy.

gm_03181GM

GM will cut 1600 more jobs, force more than 1000 dealerships to close and shut down its plants for most of the summer in order to qualify for more government aid. And indeed, GM received another $2 billion from the Treasury to keep it going another month or so.

GM’s CFO announced that the company will not be making its June 1st debt payment of $1 billion. Instead, they will have “an open debt-for-equity exchange offer for bondholders on June 1”.

Bankruptcy is still a possibility for GM. Preparations are being made for this contingency, with a taxpayer cost $70 billion.

Yet another possibility for GM is a proprosal it made to Treasury that would give the UAW 39% of the company, the federal government 51% and bondholders 10%. Treasury is still mulling the idea over but my bet is that this is how it will go down. A deal that gives the government and a major labor union ownership of the company will be much to enticing for Geithner and Obama to pass up.

fordFord

Meanwhile, Ford is quietly making due without government money, capturing 16 percent of a severly limited car market in March, thanks primarily to its hybrid vehicle, Fusion.

So while Ford is still losing money as most automakers are in this economy, Ford’s stock shares were up in April.

I’m keeping my fingers crossed for Ford. If they can survive this crisis without taking any taxpayer money they will be heroes in my book.

Housing and Personal Finance

Housing

house_ablazeForeclosures were up 24% in Q1. More than 10% of recent FHA loans are delinquent. Even prime mortgage losses are exceeding expectations, at least for JP Morgan.

Housing prices continue to decline according to the Case Shiller Home Price Release for March 2009. Take a look at Mish’s excellent analysis here.

The government’s mortgage modification program seems to be doing little or nothing which should be no surprise to anyone who looked at the details of that program.

Personal Finances

Consumer Prices Suffer First Annual Decline Since 1955, yet consumer spending still fell for the first time in three months, down 0.2%. Americans are re-learning thrift, it seems.

Bankruptcies are still rising, both business and individual. 130, 831 bankruptcy cases were filed in March 2009 – an increase of 46% over March 2008 and an 81% increase over March 2007.

And somehow, in spite of all the bad news surrounding them, consumer confidence rose in April to its highest level since last November. Huh?? My guess is that the average consumer has been watching the Dow and taking it as an indication of the economy’s general health. That and Bernanke’s “green shoots” along with Barack Obama’s “glimmers of hope”.

Having watched the stock market and other economic news much more closely over the past six months than ever before in my life, I can tell you that gauging the nation’s economic health by the stock market is stupid. Wall Street is completely disconnected from reality.

Unemployment

souplineUnemployment rose again in all US metro areas in March. Continued claims remain at an all-time record, 6.27 million.

The government’s official unemployment rate is now at 8.5% but in reality it is now 15.6%.

Unemployment figures combined with housing reports points to an extended period of recession still ahead of us.

Last Words

Trying to figure out what’s happening in the economy and what is ahead is a difficult proposition, perhaps even impossible. A New York Times reporter went to a number of conferences and talks and wrote about the conflicting information he heard – all based on the same data.

Nobel prize winning economist Joseph Stiglitz has blunt criticism of the Obama administration’s economic programs so far. Read the eye-opening Bloomberg interview here.

And finally, just to keep things real, have a look at “The Top 10 Signs You are Living in a Banana Republic“.