John Walter

Where Are the Bank Failures in This Financial Crisis?

Perhaps more than anything this lack of failures is due to a restructuring of the banking industry.

In the S&L days, failures were regionalized due to the localized nature of S&L (indeed, even commercial) lending. There was little or no repackaging or tranching of loans. When a region saw a disproportionate number of loan defaults, may of the regional banks were in trouble.

Consequently, the losses incurred by those institutions that failed were simply too big for them to swallow, given their relatively small size.

Today, the same magnitude (more or less?) of losses is being absorbed by much larger firms, who are more well equipped to handle the write-downs and/or are deemed "too big to fail", either one of which keeps them in business.

It's not to say that the losses, and consequent shaking of faith in the stability of the system, aren't still very serious.

...my two cents.