Saturday, August 22, 2009

Bank Failure Friday

It's Saturday morning, so that must mean it's time for an article about all the banks the feds seized yesterday. That makes 81 failures this year.

Perspective: from 1982 to 1992, which includes the S&L blow-up, banks were closing by the hundreds, so 81 failures seems like a return to normal failure rates after a decade and a half of deregulation and extremely lax enforcement. But what is different this time around is that part of that deregulation has resulted in a smaller number of much larger banks. The assets of the 1,000+ banks in the S&L clean-up totaled $519 billion. Not a shabby amount by anyone's accounting. But with just over 100 bank failures in 2008 and so far in 2009, the FDIC has already forked over $300 billion, and that doesn't include any of the bail-out money, which adds another trillion (conservatively) or two (more likely).

So where are we? Uncharted waters, mostly, which historically favors the fast and the small.

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