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Thread: Yet another bank failure

  1. #1
    God/dess Deogol's Avatar
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    Default Yet another bank failure

    Starting to drop almost weekly!

    http://www.marketwatch.com/news/story/integrity-bank-closed-10th-failure/story.aspx?guid={AE7ED3A9-3D75-4E2B-8081-B053ED922541}

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    Banned Melonie's Avatar
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    Default Re: Yet another bank failure

    ^^^ yup there is now a running joke about 'FDIC Fridays' i.e. another bank closure occurring every week. The first problem of course is that the number of troubled banks greatly exceeds the number of Fridays !



    The second problem is that the total potential FDIC insurance payouts on failed bank accounts vastly exceeds the (rapidly declining) cash reserves of the FDIC. In fact, the FDIC has already taken steps to seek the authority to 'borrow' directly from the US Treasury when its own cash reserves are depleted.

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    Default Re: Yet another bank failure

    Wow, Mel, that's some good shit! Thanks. I bookmarked the bankimplode site.

    I really liked this quote:The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.

    Now there's a novel idea, eh? Never ceases to amaze me how the bigger they are, the harder they fall, and sometimes the dumber they are. What kind of idiot would charge the same rate, regardless of risk? (shakes head).

    Methinks a hard rain is gonna fall....

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    Default Re: Yet another bank failure

    What kind of idiot would charge the same rate, regardless of risk? (shakes head).
    ... how about a politician who wants to promote (gov't subsidized) low income housing to appeal to a large swath of his constituency, but who can't get away with calling for too much subsidy money being allocated from government / GSE coffers ?

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    Member alwaysamission's Avatar
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    Default Re: Yet another bank failure

    I'd like to think that the actuarial process of setting rates according to risk (or otherwise) would be handled by executive "experts" rather than at a political level. Of course, you'd like to think that Fanny / Freddy could be run conservatively / intelligently too and that doesn't seem to be going so well.

    My own thought (and no one made me an expert) is that encouraging the development of any kind of housing at a state or county level is such a small piece compared to managing the FDIC that it would take too much juice, with too much collateral damage, and too many people involved, to manipulate the entity. You'd have to be a villain of comic book proportions to drag down an institution the size, age and scope of the FDIC to get some "attagirls" from 6MM people / 2MM voters in order to manage a $22BB budget.... (scratches head)....shit. $22BB is a pretty big number (that's LA county's annual budget)....

    Are you going to "whip out" one of your already-becoming-famous links to a quantitative and reliable news source to persuade me? Or will you next tell me that there are black helicopters following me around town?

    You're not really Fox Mulder, are you? C'mon...out with it! Fess up!

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    Default Re: Yet another bank failure

    speak of the devil ...



    basically the failed Silver State Bank is another hastily arranged 'shotgun wedding' solution, with former Silver State branches reopening on monday as new branches of the larger Nevada State bank of Las Vegas.

    A potentially interesting tidbit is that Andrew McCain was a former officer of this bank.

    A far more interesting tidbit is that the FDIC has finally made it official ...

    (snip)"The FDIC plans to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund, currently at $45 billion, is expected to take a hit from IndyMac of $4 billion to $8 billion.

    Federal officials expect turbulence in the banking industry to continue well into next year, and more banks to appear on the FDIC's internal list of troubled institutions.

    Of the 8,500 or so FDIC-insured banks in the country, 117 were considered to be in trouble in the second quarter - the highest level in about five years and up from 90 in the first quarter. The agency doesn't disclose the banks' names."(snip)

    An increase in FDIC insurance premiums will of course result in lower interest rates being paid to depositors on FDIC insured accounts. It will probably also result in an increase in bank loan interest rates being charged to borrowers.

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    Default Re: Yet another bank failure

    I've noticed all the new credit card offers I get have an interest rate around 14%. Previously they were around 8% to 10%.

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    Default Re: Yet another bank failure

    ^^^ well, arguably, this is illustrative of a wide gap developing between 'government statistic' consumer interest rates applying to theoretical new mortgages / car loans / credit cards, and REAL interest rates charged for new loans that will actually be approved. The theory behind this is that, because Americans still aren't actually saving money, the capital banks need to make new loans actually originates offshore. And in order to attract this foreign loan capital, US banks must promise the investors a payback that is competitive with other investment opportunities 'at home'.

    One readily available indicator of this phenomenon is the TED spread ... i.e. the difference between interest rates paid on 'ultra safe' US 3 month treasury bills versus interest rates paid on US dollar futures in Europe i.e. LIBOR. The higher this spread becomes as a result of the necessary attraction of foreign investment capital to the US, seemingly the higher that real world US loan interest rates rise. Granted that there is some time lag involved, which translates into losses by US banks until their higher costs of capital can be passed on to new borrowers.


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