Three More Bank Failures: Quiet Week

In a week that saw the FDIC increase their bank watch list by 36% to 416 banks (read about it here), the news late Friday was that the list had been cut back to 413. Not necessarily good news, because the reduction of the list was accomplished with three more bank failures.

This brings the total closings for 2009 to 87. In August, 14 banks have gone under. This is down from 18 in July, the busiest month so far this year.

This was actually a quiet Friday, compared to recent weeks. The details of the most recent closings are summarized in the following table.

The details of the four closings on August 21 are summarized in the following table.

This increases to $148.6 billion the assets involved in bank failures since the beginning of 2008 that were handled by the traditional FDIC receivership process .

The bulk of the bank failures have been beyond the capacity of the FDIC to handle with the traditional process. The FDIC brokered, with government support, the failures of Wachovia and Washington Mutual. Major failures in the “shadow banking” system were resolved with government brokered arrangements (AIG, Fannie, Freddie, Lehman, Bear Stearns and Merrill Lynch).

Government “brokerage” also handled the CitiGroup situation. The FDIC has handled only about 2% of the failures so far in this crisis. The scope and details of these events were discussed here.

The FDIC has arranged for the following banks to receive deposits and assets this week: M&T Bank (MTB) of Buffalo (from Bradford Bank of Baltimore); Central Bank of Stillwater, MN (from Mainstreet Bank, Forest Lake, MN); and PacWest Bancorp (PACW) of San Diego (from Affinity Bank of Ventura, CA).

It is a sign of the times that three bank failures involving more than $1.9 billion in assets and $446 billion in FDIC expenses are probably considered good news. The dollar amounts were significantly smaller than the week before. The three bank failures seem insignificant compared to the 413 banks remaining on the FDIC watch list; or the approximately 1,000 banks estimated yet to fail by UnitedBank (Florida) CEO John Kanas (here); or the 1,882 banks recently receiving a failing grade from Christopher Whalen, managing director at research firm Institutional Risk Analytics (discussed here).

Since 32 banks have failed since June 30, presumably 1,850 banks still remain on Whalen’s list. The preceding sentence presumes no additional banks have been added since.

A good article by Philip van Doorn, with additional details about this week’s FDIC actions, is available at TheStreet.com (here).

Disclosure: Short bank stocks through ownership of SKF.

Comments

[Roger Knights:]

"This brings the total closings for 2009 to 87."

The total's 84; you've added 3 twice. (Good article otherwise.)

Aug 30 03:06 AM

[Steven Hansen:]

John, unfortunately it is all funny money. as you point out, the costs of resolution on what is going on is in this pocket or that pocket or another pocket.

who ever is tasked with cleaning up the failure will price assets at whatever number suits him (or her). they will wait for asset appreciation to grab hold.

we are surrounded by legalized fraud.

Aug 30 03:16 AM

[Old Trader:]

It might well be a monumental to task to figure out, and I'm not sure how readily the information is available, but it would be interesting to see how the list of troubled banks compares with a list of "at risk" banks as defined by the Texas ratio. Or is that the metric used by the FDIC?

Aug 30 09:12 AM

[Ferdinand E...:]

Surrounded by "legalized fraud", the man said. I can think of a lot worse. Starting a war under false pretenses to begin with, and then continuing that war even though everybody gets the message.

Aug 30 10:34 AM

[John Lounsbury:]

Roger - - -

Thanks for pointing out my error. I would ask SA editors to make the correction, but I am not sure which would be a better correction: the number of failures or the date.


On Aug 30 03:06 AM Roger Knights wrote:

> "This brings the total closings for 2009 to 87."
>
> The total's 84; you've added 3 twice. (Good article otherwise.)

Aug 30 10:41 AM

[Old Trader:]

"I am not sure which would be a better correction: the number of failures or the date."

An EXCELLENT point...

Aug 30 12:24 PM

[DarkBank:]

Either way, the FDIC and whole banking system has a long way to go and expect more issues to arising on how best to expedite moving "toxic assets"!

Aug 30 01:59 PM

[nonidiomatic:]

Hooray for the short ETF's

Sep 03 04:37 PM

[dragonpaw:]

All these failures of banks are simply part and parcel of the long term total failure of the US banking -financial system that will be upon us within a couple of years. The Obamacons and their neo-facist czars, commies, America-haters,race-mo... capitalist-bashers and religious-ridiculers are only a few trillion dollars away from bankrupting the system. They will continue to bash and blame Bush in their diatribe toward defeat, with the slobbering media defending and ombuscating every step of the way. So many ruses will be continually thrown at the general public, that most will bury their heads in the sand at the onslaught of our countries impending bankruptcy.
As the gov't seizes control of all public and private accounts, the public will be clamoring for their 'anointed one' to do whatever is possible and necessary to save us.
Complete socio-facist control may be what the public bites for; but then again a few well-placed instigated wars may be what it takes to get us moving in that direction. In true Deom-gogueic fervor, nothing will be to great a sacrifice to "save our freedoms!"

Sep 05 12:49 PM