Bank on this: bank failures will rise in U.S.

Aristartle · Oct 6, 2008

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Bank on this: bank failures will rise in U.S.

Mon, October 6, 2008
ECONOMY: Enfeebled by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s

By MICHAEL LIEDTKE, THE ASSOCIATED PRESS

SAN FRANCISCO -- Here's a safe bet: A lot of banks won't survive the next year of upheaval despite the U.S. government's $700-billion plan to restore order to the financial industry.

The biggest question is how many will perish and how they will be put out of their misery -- in outright closures by regulators scrambling to preserve the dwindling deposit insurance fund or in fire sales made under government pressure.

Enfeebled by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period.

That was during the cleanup phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170 billion to $205 billion, after adjusting for inflation.
The government's commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.

Stanford Financial analyst Jaret Seiberg says it will help, but it's not going to be the saving grace.

He says that's because a lot of banks are holding construction loans and other types of deteriorating assets the government won't pick up.
Seiberg expects more than 100 banks to fail next year.

The darkening clouds already have some depositors pondering a question that always seems to crop up in financial panics despite deposit insurance: Could it possibly make more sense to stash cash in a mattress than in a bank account?

"It sounds like a joke," said business owner Mauricoa Quintero as he recently paused outside a Wachovia Bank branch in Miami. "But it sounds safer than the turmoil out there right now."

Not as many banks are likely to fail as in the S&L crisis, largely because there are about 8,000 fewer today than there were in 1988.
But that doesn't necessarily mean the problems won't be as costly or as unnerving; banks are much larger than they were 20 years ago.
"I don't see why things will be that much different this time," said Joseph Mason, an economist who worked for the U.S. Treasury Department in the 1990s and is now a finance professor at Louisiana State University.
"We just had a big party where people and businesses overborrowed. We had a bubble and now we want to get back to normal. Is it going to be painless? No."

With more super-sized banks in business, fewer failures could still dump a big bill on the Federal Deposit Insurance Corp., the government agency that insures bank and S&L deposits.
The FDIC's potential liability is rising under a provision of the bailout that increases the deposit insurance limit to $250,000 per account, up from $100,000.
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zihger · Oct 6, 2008

Are the odds of your home getting robbed higher then your bank closing?

For most people right now it is much safer to have their savings at home.

Yeah your bank might be insured but how long will it take to get your FDIC insurance claim back?
In time for rent or food?

Hiptastic · Oct 6, 2008

More banks will fail here, in Europe, and worldwide.

But no its not hard to get money out of the FDIC. Washington Mutual people have their deposits, that's the first thing the FDIC takes care of when they take over a bank. Just make sure if you 't don't have above $100,000 with any one bank.

Money in the mattress is bad advice.

wackyiraqi · Oct 6, 2008

I have a big safe in my house. I will hang on to your money for you.

Tymar · Oct 8, 2008

Yea. There's not much good news. That 700 billion dollars isn't backed up by anything, they pulled it out of thin air and they're going to come after us for it. Bush, Cheney and that whole crew are a bunch of Nazis. I'm not kidding. Why we ever let them get away with the things that they have I'll never know. We got lazy. I'm afraid that we've made our bed and not too well. The banks are and will hoard the money for a while at least and at least one CEO has already given himself four millions dollars. And this is the rosy outlook.

Stolen elections, the infamous Ken Lay helping Bush establish his cabinet, Rove, money being obstensibly created out of debt, Cheney and his secret meetings with oil and other industries, torture, etc., etc.

About the time of Christ the Roman Republic had been lost. Rome was becoming an empire. Two of the old Republican families concluded that drastic measures were necessary in order to prevent the imperialization of Rome. A member of each family came forth to execute an orchestrated plot. One was named Lepitus, the other, Brutus. But the extreme nature of the caper only revealed that the Republic was nothing but a sweet memory and a hopeless dream.

Peace, Love and Rock n Roll--

Tymar

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Bank on this: bank failures will rise in U.S.

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