Problem Bank List Updated: Sovereign Defaults Ahead?

We wanted to take a moment and post up some updated data regarding the 'problem bank list' since we saw late last week that yet another major bank (Corus Bank (CORS)) has failed. The FDIC releases this data monthly with a delay and Calculated Risk (a great Economics blog by the way) with the help of a reader did a great job of aggregating the spreadsheet of information. This data was posted up on September 4th, so hopefully timelag isn't too bad since the information is already released on a delayed basis much like the SEC filings we track in our hedge fund portfolio tracking series.

Below is the table of problem banks and make sure you scroll (both horizontally and vertically) as the list is pretty comprehensive. RSS & Email readers come to the blog to view the table:





Under the 'Class' column, note that N stands for national chartered commercial bank, SM stands for state charter Fed member commercial bank, NM stands for charter Fed nonmember commercial bank, SA stands for state or federal charter savings association, and SB stands for state charter savings bank.

Very interesting stuff to examine as always. Lastly, since we're on the topic of bank collapses, we just went back and read a piece on Washington Mutual's failure and thought it would be interesting reading for those of you who haven't seen it. If you're all gloom and doom now that you've seen yet again the poor state our financial system is in, we can do you one better. Nevermind bank failures, hedge fund manager Kyle Bass of Hayman Advisors has previously predicted sovereign defaults. Now wouldn't that be just dandy? So, we'll end with a toast: here's to many more anticipated bank failures.

Comments

[Denis Gould]

On the idea of sovereign defaults, Japan is heading towards government debt of 200% of GDP. They either grow out of it, tax out of it, or...default out of it

2009 Sep 16 03:06 AM

[Moon Kil Woong]

Japan. There is a reason why Japan never recovers. We seem to be using them as a case study for what we can look forward to in the future. So far we copied their real estate bubble, their mass deficit spending, quantitative easing, and more deficit spending.

If we follow the game plan we will try to build a city in the sea to stimulate the economy, let banks suspend all sense of accounting reality, protect every major industry even if it's run by gangsters, and use the post office and other government controlled industries as investment vehicles to prop up the market (let's use social security an GM's pension plan to start). Then we run out of money and can't Keynsian stimulate ourselves into recovery because we are broke. Somewhere along the line everyone loses faith in government as we keep our economy at rock bottom for decades with mass unemployment.

Thanks for making me gloomy Does nobody... Yes, and the author thought bank failures were bad. It's just the tip of a big iceberg. Banks not failing that should are a bigger problem, especially since they are about 100x bigger, more incopetent, and more corrupt.

2009 Sep 16 03:41 AM

[Vuke]

Scary stuff. Floods of new paper are bound to come from this. It appears a 50 to 75% devaluation of almost all currencies is the ultimate fix.

It's like a game of playing chicken, with world currencies darting to and fro into heavy traffic.

2009 Sep 16 04:39 AM

[Michael Clark]

Grow out, with exports collapsing? Tax out of it, with tax receipts collapsing? Default? Is that their only choice?


On Sep 16 03:06 AM Does nobody understand what long term actually means? wrote:

> On the idea of sovereign defaults, Japan is heading towards government
> debt of 200% of GDP. They either grow out of it, tax out of it, or...default
> out of it

2009 Sep 16 05:34 AM

[Michael Clark]

Japan is still hiding toxic assets in their banks, aren't they? Isn't that another Japanese path we are following?


On Sep 16 03:41 AM Moon Kil Woong wrote:

> Japan. There is a reason why Japan never recovers. We seem to be
> using them as a case study for what we can look forward to in the
> future. So far we copied their real estate bubble, their mass deficit
> spending, quantitative easing, and more deficit spending.
>
> If we follow the game plan we will try to build a city in the sea
> to stimulate the economy, let banks suspend all sense of accounting
> reality, protect every major industry even if it's run by gangsters,
> and use the post office and other government controlled industries
> as investment vehicles to prop up the market (let's use social security
> an GM's pension plan to start). Then we run out of money and can't
> Keynsian stimulate ourselves into recovery because we are broke.
> Somewhere along the line everyone loses faith in government as we
> keep our economy at rock bottom for decades with mass unemployment.
>
>
> Thanks for making me gloomy Does nobody... Yes, and the author thought
> bank failures were bad. It's just the tip of a big iceberg. Banks
> not failing that should are a bigger problem, especially since they
> are about 100x bigger, more incopetent, and more corrupt.

2009 Sep 16 05:35 AM

[Ohrama]

Considering the debt as a percentage of GDP does not tell the real story. We need to consider 1) How much that GDP is worth to outsiders if we need to raise money to retire that debt (especially if it is owned by foreigners) and 2) What path the currency of a country is expected to take in the future and 3) How willing the population to sacrifice their personal needs and greed and work hard to rescue the country. As far as GDP is concerned, I am afraid that ours has become a hamburger economy with inflated wages (thou shall pay a minimum of 8$ per hour because Hillary Clinton says so!) and perhaps 80% of our GDP is worthless to foreigners and cannot be sold (when I find some time I would like to tear apart the various components of our GDP and quantify what parts of it are really useful). And our currency is loosing steam (It is still valued because of the past - I call it the flywheel effect where the stored energy keeps it going - and the rest of the world is scrambling to find a way out of the dollar reserve) and when that happens we will be faced with a debt, especially to foreigners) which can never be paid. .Also, at least right now, I don't see the sacrifice and work hard mentality needed to get us out of the mess (Give me free cash like C4C so that I can buy that new shiny car! And let someone else pay higher taxes!!). So, let us not find solace that our debt to GDP ratio is small compared to say Japan.


On Sep 16 03:06 AM Does nobody understand what long term actually means? wrote:

> On the idea of sovereign defaults, Japan is heading towards government
> debt of 200% of GDP. They either grow out of it, tax out of it, or...default
> out of it

2009 Sep 16 08:12 AM

[Trane250]

How about exporting out of it? Japan, Inc. has the uncanny ability to design and manufacture just about every product that the world values. You don't have to worry about Japan's defaulting on their debt.


On Sep 16 03:06 AM Does nobody understand what long term actually means? wrote:

> On the idea of sovereign defaults, Japan is heading towards government
> debt of 200% of GDP. They either grow out of it, tax out of it, or...default
> out of it

2009 Sep 16 09:35 AM

[bricki]

Another big factor that is crushing Japan is their demographics. Japan's people have the oldest average age in the world, and the lowest birth rate. The population is declining. Plus they are a monolithic, xenophobic society that is not friendly to immigrants. Plus they are a nation of savers, and are run by a hide-bound bureaucracy. The result is declining internal consumption - and a social structure that is unlikely to react to change, and will not go out and spend stimulus money.

I do not have much faith in Japan's ability to rectify this short of some massive social upheaval.

2009 Sep 16 10:02 AM

[Value Added]

...or print their way out of it. Sovereigns have one advantage over you, me, and businesses that are not too big too fail: we don't own printing presses. Ultimately, to avoid default, they will inflate their way out of it. Another commenter has it right when he said that the ultimate solution may be an enormous devaluation of most world currencies. Very scary stuff. Sadly, it's not wildly improbable anymore, it's a real possibility. For that reason, I recommend 10% minimum in precious metals right now. Minimum.


On Sep 16 03:06 AM Does nobody understand what long term actually means? wrote:

> On the idea of sovereign defaults, Japan is heading towards government
> debt of 200% of GDP. They either grow out of it, tax out of it, or...default
> out of it

2009 Sep 16 12:51 PM

[LKofEnglish]

So we'll have another Argenina. So what? Dog bites man. Saying the USA will be the next Argentina--that's interesting. Clearly its a horrendous policy choice of democrats to choose health care over the economy. i certainly believe the stock market has shown Ben Bernanke's policy of QE to be a COMPLETE AND UNNECESSARY DISASTER. So of course if the USA is driving up its OWN interest rates by DEBAUCHING its currency this causes problems for the rest of the world since we're just making EVERYTHING more expensive in the world. AMERICANS BY AND LARGE ARE NOT LAZY. I've travelled over 30 states in the past 5 months and we not only mine but we mfg as well. And that hasn't included the "Saudi Arabia" of North America Louisiana. In any case let the nay-sayers nay say. BOTH the stock and bond markets have said this recession ended MONTHS ago.

2009 Sep 16 01:05 PM

[WheelsComingOff]

There is a clause in the Federal Reserve's charter that states that (paraphrased) "in the event of war, outstanding loan payments would be withheld." Maybe this is the fourth option?


On Sep 16 05:34 AM Michael Clark wrote:

> Grow out, with exports collapsing? Tax out of it, with tax receipts
> collapsing? Default? Is that their only choice?

2009 Sep 16 03:23 PM

[EMS News]

Nearly half of US debt is owed to investment bankers, foreign powers and trade rivals. 85% of Japanese government debt is owed to Japanese people, not outsiders.

This is a HUGE difference. Japan can simply default and it would be like a tax hike. The US defaults and we won't be able to buy oil or a lot of other stuff.

2009 Sep 16 04:06 PM

[Moon Kil Woong]

Michael Clark: The litany of similarities are too many to count. You are quite correct. Japan engaged in the real estate assets are valued at what they are acquired by the bank at until they are sold or rented or management decides to write it off. Thus is a building is worth only 50% ofwhat they got it pre-Japan crash it can still sit on their books at face value unrented and unsold til this day at 100% it's face value. The US is no better. Many derivatives positions aren't even officially shown on our banks balance sheets. Which is worse, lying or denying they even exist?

2009 Sep 16 10:04 PM

[Randall Pink Floyd]

I lost everything in cors, if ever i run into any of the glickmans in a dark alley....... It will be their brain matter on my tire iron.

2009 Sep 21 08:13 PM