FDIC Banks vs. S&Ls and a coming crisis???
The U.S. Federal Deposit Insurance Corp. said its ``problem list'' of banks increased [to] 117 ``problem'' banks as of June 30, up from 90 in the first quarter and the highest since mid 2003 ... FDIC-insured lenders reported net income of $4.96 billion, down from $36.8 billion in the same quarter a year ago.
U.S. savings and loans posted a $5.4 billion loss in the second quarter as lenders set aside record reserves for loan losses amid the slump in the housing market, the [Treasury's Office of Thrift Supervision] said.
So if we take the entire universe of FDIC banks and S&Ls, there was a net loss in Q2. If we add in investment banks, the losses would rise in the tens of billions. Can anyone remember when the entire banking system in America was reporting a net loss......my guess is no!!!!!
Next quarter will likely be much worse as asset values continue to fall and defaults continue to rise.
Further, it seems clear now that banks are not fully reporting their losses:
The Federal Deposit Insurance Corp said on Tuesday it now expects IndyMac's failure in July to cost its insurance fund $8.9 billion, compared with the previous expected range of $4 billion to $8 billion.
Diane Ellis, the FDIC's associate director of financial-risk management, said IndyMac's expected hit to the fund blossomed because analysts have had more time to value IndyMac's assets and have assigned some higher loss rates.
We can try to compare the current period to other earlier periods.....unfortunately, there is no comparable period.....welcome to the world of Black Swans.
You think the government is a little worried:
Federal Deposit Insurance Corp. Chairman Sheila Bair said Tuesday her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures.
The last time the FDIC borrowed funds from Treasury came at the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
Now it needs to borrow money at the beginning before many of the expected failures have even occured!!!!!!!!!!!!!!!!!!!!!!
My friends, it ain't too complicated....if the banks are broke......we are all broker and we can all look back with a fond memory about all the time we spent planning for retirement.