Saturday, January 16, 2010
Bad 2010 start for banks in the US
The US Federal Deposit Insurance Company publishes the names of banks which are closing, because the FDIC insures the deposits in those banks.
Every Friday it updates a list of closed banks, dating back to 2000. From June 2004 to Feb 2007 not one bank failed. Three failed in 2007, 26 failed in 2008, and 140 failed in 2009. Over 550 banks are now on the FDIC "problem list", meaning they are at risk.
It is a small sample size, just two weeks of information, but already this year four failed banks have made it onto the FDIC list. That is twice the rate of 2009. The US taxpayer is on the hook for FDIC's so-called insurance.
And because of a governance attitude that can best be described as "pretend and extend", troubled banks are in far worse shape (more liabilities, fewer good loans) than they would be if swift action had been taken. In other words, more taxpayer money will be required to fill the crater left by the bank failure.
The US economy is not, repeat NOT, sprouting green shoots.
Update Jan 24: 5 more.