Problem Banks in 2008 Are Nowhere Close to 1990-91

The FDIC recently released data through the fourth quarter 2008 on the number of "problem institutions," and the assets of those problem banks. The chart above shows that there were 252 problem banks in 2008, out of a total of about 8,300 banks. In contrast, there were almost 1,500 problem banks in 1990, or about 6 times the number in 2008.

The chart below shows the inflation-adjusted value of bank assets at problem banks from 1990-2008. Compared to the $156 billion of problem bank assets in 2008, there were more than 8 times that amount in 1991 ($1,298 billion).

Comments

[mpharbold1:]

2008 is over. How many problem banks are there now and how many will there be in 2010? My guess is the amount is inincreasing drastically.

Mar 03 03:47 AM

[joshuaodonnell:]

The "problem" banks aren't the problem. The debt is the problem. Because the debt will create more and more problem banks... Thats the real problem...

lots and lots of problems....... That never really seem to have a solution. The real problem is the government. The government is creating more and more debt by borrowing "problem money" for the future. This puts huge strains on big and smaller regional banks. When you have a company like Lehman Brothers that was most of the time leveraged 60:1, you have a real problem. They defaulted on everything, and then collapsed. That is basically what happened to the government.

Mar 03 04:06 AM

[H.J. Huneycutt:]

How can there only be $200 billion in "problem bank assets" when TARP pledged about $700 billion towards the problem and is generally acknowledged to have been too small --- most estimates now seem to suggest $2-4 trillion total for the taxpayers. Methings the data behind these charts might be misleading and that the government is not defining banks with tons of toxic sludge on their books as "problem banks".

Mar 03 05:19 AM

[Hefaistos:]

If you look at bankrupcies as an indicator of bad debt, you will see that there is about a two-year lag between the occurence of a financial crisis and the peak of bankrupcies (data from various countries).
Thus, a lot more of problems are to be expected, through 2010.

Mar 03 08:52 AM

[venividivici:]

Over the last 18 months you have had article after article on this site pushing the same theme, things are not nearly as bad as they seem and not nearly as bad as they have been at other times since World War Two.
During that time the world's financial system has got progressively worse and at times has teetered on the brink of total collapse. The only thing that has saved most of the world's largest banks from bankrupcy has been unprecedented government intervention and assistance with trillions of dollars of public money.
Your head, Mark J. Perry appears to be filled with concrete. It's all mixed up and permanently set.

Mar 03 09:38 AM

[MLKlein:]

It would be of interest to know what the bad bank situation looked like in 1988 since that year marked the beginning of the melt down. By 1990, we were well into the problem. Also, I suspect the numbers include the S&L's. The S&L's should be taken out since that was an industry that, while lumped in with the banks, was run at very low capital levels and made bankrupt by increased capital levels that could never by realized.

I have been told by several bankers after their regulatory exams that the FDIC is projecting a 15 to 20% failure rate in this cycle. Stay tuned.

Mar 03 11:01 AM

[PainfullyAware:]

Your statement, although correct from a certain vantage, does not further the discussion.

Personal attacks do nothing but divide community.

Optimists give the best metrics to watch for turn around. Without their foolery in the face of disaster many would not know where to look for respite.

Wisdom can be found in unlikely sources. Reason and Rational must be applied to all information to asses how filtered the facts have become through others. Nothing but ones own personal experience is truly their own. All information is filtered through others and is thus suspect to bias.

Without Extreme Views The Spectrum Can Not Be Fully Defined.


On Mar 03 09:38 AM venividivici wrote:

> Over the last 18 months you have had article after article on this
> site pushing the same theme, things are not nearly as bad as they
> seem and not nearly as bad as they have been at other times since
> World War Two.
> During that time the world's financial system has got progressively
> worse and at times has teetered on the brink of total collapse. The
> only thing that has saved most of the world's largest banks from
> bankrupcy has been unprecedented government intervention and assistance
> with trillions of dollars of public money.
> Your head, Mark J. Perry appears to be filled with concrete. It's
> all mixed up and permanently set.

Mar 03 02:31 PM

[PainfullyAware:]

Things are much worse than Governmental Metrics would imply.

Remember, they are well incentivized to "Color" their information.

Mar 03 02:34 PM