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Crisis for smaller banks finally arrives in My neighborhood

    At the burning tip of the credit inflation, the biggest banks were not only perforce placing the biggest bets, but many were also playing with a higher proportion of the riskiest cards. So it's not exactly stunning that their huge aggregate losses tend to catch the attention of the press, and its consumers.
   At the time, I patted myself on the back about the health of the three (carefully researched) banks I did business with. The were rated A+, A, & A-, by's banks screener. My A- went down to a B+, but I didn't keep much money there, so I slept soundly, as Lehman, Bear, et al roiled the financial and political world, and seized the headlines.

    Then came the steady, drip, drip, 'Chinese water torture' of local banks failing. It started with a few heavy mortgage players, in overbid markets - nothing particularly relevant to me, in the rural backwater where I reside. But gradually, the cratering spread, and spread, and spread. I got a bit nervous. My A+ was now down to an A. But everything else held. 

    Well, the 3rd quarter's numbers have now been digested, and the ratings adjusted, and Trouble has arrived. The decline in business activity, and therefor wages, and therefor real estate prices, and therefor default rates, has finally started to take a serious toll, even on the very best banks at my disposal, even in my neck of the woods.
   I live in Tennessee. As long as I have been keeping track of such things (2002), we have had more than our share of strong banks. In fact, we still have more than our share of A rated banks, compared to the average state. But the number has dropped, a lot. My A+ bank, that went to A, has dropped to A-. Still respectable, but a bad trend. And my A rated bank has slipped abruptly to a B-, after many years of proudly maintaining their A rating. In normal times, that would be acceptable, but these are not normal times. To put things in perspective, Lehman was rated B- in the cycle immediately before it went under. 
   If the economic crisis is measurable weakening the ratings of some of the safest banks even in my neck of the woods, then thre really IS no place to hide, and it is time for me to take heed, and start worrying in earnest. Dr. Weiss, and others, have warned about the possibility of failure rates high enough to produce situations that would be unmanageable by Federal banking  authorities. I am taking those warnings absolutely to heart now, and shifting more funds out of the US banking system.