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alstry (36.12)

FDIC Banks vs. S&Ls and a coming crisis???

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August 27, 2008 – Comments (8)

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.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOaSmPh0G3QU

VS.

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.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a8cURJiuV1Ds

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.

http://www.reuters.com/article/americasMergersNews/idUSN2637860820080826

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.

http://online.wsj.com/article/SB121977767814673649.html?mod=hpp_us_whats_news

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.

8 Comments – Post Your Own

#1) On August 27, 2008 at 3:21 PM, alstry (36.12) wrote:

Making the Case to Russia

White House says U.S., allies will make case that decision to recognize breakaway Georgian provinces was 'shortsighted'

WHAT IF CHINA RULES THE OTHER WAY???

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#2) On August 27, 2008 at 3:54 PM, DemonDoug (85.49) wrote:

"borrowing" from treasury = print new money = inflaaaaaaation.

btw if we were going to have a true deflation, it would have hit by now, with all the bank failures and writedowns, you would expect the prices of everything to go down, but no, all the money being pumped into the system is not going to financial paper assets but to hard assets.  the fed will never allow deflation to take hold.

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#3) On August 27, 2008 at 4:15 PM, alstry (36.12) wrote:

Defaulting loans=money evaporating=deflation

In the end Demon, does the fed print faster than loans default?

In the meantime we can only sit back and wait.

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#4) On August 27, 2008 at 5:00 PM, anchak (99.85) wrote:

Alstry....This is a little apples and oranges..... Because most Thrifts are bank holding companies and are covered by the FDIC report.

Things are bad ...... but lets keep our heads

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#5) On August 27, 2008 at 5:01 PM, alstry (36.12) wrote:

Let's Just Fire Everyone!!!!!!!!!!!!!!!!

SAN FRANCISCO (MarketWatch) -- United Airlines, operated by parent company UAL Corp. said it will trim 1,550 flight attendant jobs in response to reduced capacity, according to Crain's Chicago Business Web site Wednesday.

Less Capacity=Less Revenues=Less Jobs=Lower Demand=Lower Prices=Price Deflation

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#6) On August 27, 2008 at 5:02 PM, alstry (36.12) wrote:

Let's Just Fire Everyone!!!!!!!!!!!!!!!!

SAN FRANCISCO (MarketWatch) -- United Airlines, operated by parent company UAL Corp. said it will trim 1,550 flight attendant jobs in response to reduced capacity, according to Crain's Chicago Business Web site Wednesday.

Less Capacity=Less Revenues=Less Jobs=Lower Demand=Lower Prices=Price Deflation

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#7) On August 27, 2008 at 5:04 PM, alstry (36.12) wrote:

Anchak...thanks for the clarification...not sure how the overlap actually nets out but factoring investment banks and we are still tens of billions in the hole.

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#8) On August 27, 2008 at 7:23 PM, nuf2bdangrus (< 20) wrote:

FDIC is almost out of cash after only 9 bank failures.....hmmmmmmmm  and we haven't had "the big one" yet....have we?????

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