FDIC problem bank list grows
By admin on November 26, 2008
This isn’t necessarily a shocking story, but the FDIC’s problem bank list is at a 13-year high. There were 171 banks on the list in the third quarter, up from 117 in the second.
22 banks have failed this year, including three on Friday. Just to put that into perspective: 9 banks failed last year. Ouch.
Here’s more, from CNN Money:
- Though the FDIC does not reveal the names of the banks on the list, it said the total assets of these institutions rose to 5.6 billion in the third quarter from .3 billion in the previous three months, the first time since 1994 in which the assets of problem banks exceeded 0 billion.
- Since home prices began to decline late last year, banks have faced strong headwinds as the value of their mortgage-backed securities declined sharply in value. Those assets became “toxic” holdings on their balance sheets, resulting in a lending freeze, soaring borrowing costs and large writedowns.
- “Banks got caught in a vicious cycle mainly of their own developing,” said Matt McCormick, analyst at Bahl & Gaynor Investment Counsel. “The lowest common denominator turned out not to be their best client; for all their brilliance, they flunked Economics 101.”
- Still, just 2% of FDIC-regulated banks are now on its watch list, compared to about 10% in the late 1980s and early 1990s during the savings and loan crisis. The government identifies problem banks as institutions on the brink of failure, facing severe financing difficulties and management issues. But few banks typically reach that point – just 13% of banks on the FDIC’s problem list have failed on average.
Read the full story here.
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