Here’s a safe bet for uncertain times: 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 clean-up 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
The banking outlook looks even gloomier through the prism of Bauer Financial Inc., which has been relying on data filed with the FDIC to assess the health of federally insured institutions for the past 25 years.
Based on its analysis of the June 30 numbers, Bauer Financial concluded that 426 federally insured institutions are grappling with major problems — about 5 percent of all banks and S&Ls.
About 15 percent of the banks on Bauer’s cautionary list have more than $1 billion in assets. Not surprisingly, the troubles are concentrated among banks that were the most active in markets where free-flowing mortgages contributed to the rapid run-up in home prices that set the stage for the jarring comedown. By Bauer’s reckoning, the largest numbers of troubled banks are in California, Florida, Georgia, Illinois and Minnesota.
Let me see….they get $700 billion and they cannot save the banks….then where is this money really going?
Doesn’t everyone get it? Yes, banks made a lot of bad mortgages. Does anyone really think that’s enough to vring the financial system of this country to its knees? No, it isn’t, not by a long shot. Our financial system is in trouble because greedy unscrupulous cowboys have been draining money out of it for the last eight years. The current “crisis” is a ruse. We’ve been told that we’re spending $700B to save our system, but the real cost is $1.8T over the next 12-18 months. This mooney isn’t going to save banks from failure, but to a relative handful of criminals responsible for the current mess. Local and regional banks that are solvent, but are in trouble because of a lack of liquidity because the Wall Street fat cats won’t loan them any money, won’t see a dime. They will be allowed to fail. When it is all over, we will all be stuck with one or two mega-banks, who will treat us as they desire.
Reality…I agree and that was a rhetorical question. But there are still many people who still do not fully understand what the whole thing was all about. Thanx for the comment.