Bank Failure Update

2009 total hit 92 on Friday, finally including Corus Bank. The Fund drifted further into negative territory, all but insuring another special assessment in early 2010 (there are already plans for a special assessment later this year). As I've noted in the past, this is the worst time to increase bank expenses. How the FDIC saw fit to charge zero premiums for several years is well beyond my ability to comprehend.

Bank Failure Update

Starting with this post, the failure list will include only 2009 banks gone bust. The file has become too big to fit properly on blogger.

Five more yesterday, bringing the year's total to 89. Bank management and regulation has turned out to be neither a fail-safe or deterrent from greed and speculation. The Deposit Insurance fund is now empty and will require additional assessments to pay off future failures. Of course, the FDIC can always borrow from the Treasury and saddle us with the bill.

The Chair of the FDIC mentioned a contingent reserve fund during a press conference a few weeks back. I'm not sure about what this exactly is, but it seems to be store of funds that the FDIC draws fund. I will research this.


- Deposit Insurance Fund on 6/30/09: $10.368 billion

- Cost of failures since 6/30/09: $11.125 billion

- Current balance (excluding interim income): ($757 million)

Failure Friday: Back With a Bang

Five more banks were shuttered today, one really tiny, one fairly large and three in the middle. The biggest one was Colonial Bank, located (formerly, I guess) in Alabama. Colonial could not sustain the losses they suffered from an ill conceived foray into Florida real estate.

As a result, we are much closer to insuring our own deposits. I know that I have been harping on this for quite some time, but the de facto insolvency of the FDIC (along with the PBGC, NCUA and the continuing conservatorship of Fannie and Freddie) is transferring the financial burden of failure from the risk takers to the tax payers. This is not capitalism.

In review:

- 77 bank failures in 2009

- Cost of 2009 failures: $18.3 billion

Since the most recent FDIC quarterly report:

- Insurance Fund balance on 3/31/09: $13 billion

- Cost of failures since 3/31/09: $16 billion

- Special assessment income (one time): $5.7 billion

- Additional income (my estimate): $1.25 billion

- Current balance: $3.95 billion

Update: FDIC Continues to Bleed Dry

This week's tally: 5 bank failures, $911.7 million in losses

This year's tally: 69 bank failures, $14.45 billion in losses


According to my estimates (please see post on 7/25/09), the FDIC's fund is well under $8 billion. This amount of money is backing over $4.8 trillion in insured deposits. Would you allow your insurance company to operate that way? Would you agree to bail out your insurance company if they screwed up? Well, then why is the FDIC so special??????

Failure Friday Update

- 64 banks have failed in 2009

- Insurance fund balance on 3/31/09: $13 billion

- Cost of failures since 3/31/09: $11.26 billion

- Special assessment income (one time): $5.7 billion

- Additional income (my estimate): $1.2 billion

- Current balance: $8.64 billion

It is a certainty that the FDIC will run out of funds and tap their credit line with the Treasury Department. This will necessitate the issuance of more Treasury debt and increase the burned n the taxpayer.

FDIC Gets Busy: 7 Failures

Seven banks were shuttered yesterday, six of which were domiciled in Illinois. All of the banks were small, Founders Bank was the largest at just under $1 billion in assets. According to a Bloomberg news story, all six Illinois banks were controlled by the same family.

Poor decision making was not reserved to the money center banks or the greed of new banks. The FDIC will be busy for another year.

Failures Galore

Five more bank failures yesterday, 2009 total now equals 45. All five banks were quite small, I'm not sure if the FDIC is making the best use of their time. There are some good sized banks that are in significant trouble. The longer they linger, the more they will impact the taxpayer.

3/31/09: FDIC Deposit Insurance Fund (DIF) has a balance of $13 billion

5/22/09: FDIC announces special assessment to raise roughly $5.7 billion

Cost of 2nd quarter failures: $9 billion

That would leave the DIF with $9.7 billion. I'm sure the DIF has earned interest on their investments and collected additional premiums, so let's say the DIF has about $10.5 billion on hand.

My guess is that the imminent failure (my opinion) of Corus Bank will cost about $2.97 billion, dropping the DIF well below $10 billion.

The other good sized banks that are in danger of failing (my opinion again) are:

Frontier Bank
Ocean Bank
Westernbank Puerto Rico
AmTrust Bank
R-G Premier Bank of Puerto Rico

Loss estimates: $1.5 billion, $1.6 billion, $2.3 billion, $2.4 billion and $729 million respectively.

The total would be $8.6 billion, collapsing the fund into negative territory. That credit line will undoubtedly be tapped and we will be insuring our own deposits sooner than the markets think.

Failure Friday Returns

40 banks have closed so far this year, three of which were closed yesterday. All three banks were on the bad banks list.

I am puzzled by the seemingly haphazard process that the FDIC is following when deciding to shutter a bank. Size is obviously a concern (the larger the bank, the longer it tends to linger), but beyond that, there seems to be no discernible pattern.

This Corus Bank saga is crazy. The bank is beyond repair and management has been selling shares by the millions in the last few weeks. The longer this bank is allowed to exist, the greater the risk to the FDIC. Since the FDIC is running out of money, that means more risk for you & me.

Failure Friday

Just one so far tonight: Bank of Lincolnwood. Tiny, near the top of the bad banks list.

Failure Friday

Two more banks shut down today, 2009 total is now at 36. The FDIC also released its new assessment plan. According to my calculations, it will bring a whopping $5.7 billion into the fund. That would cover this week's failures. I am not impressed.

One may ask: won't this assessment plan hurt the banks that are in most need of the insurance? The answer is: of course.

Raising expenses during a crisis is not a great idea. Maybe charging ZERO premiums from 1995 - 2005 wasn't such a good idea either.

http://www.fdic.gov/news/news/press/2009/pr09074.html

Failure Thursday?

(2 tables above: bad banks on the left, failures on the right. please click to expand)

It has finally happened:

BankUnited, FSB Closed

http://www.fdic.gov/news/news/press/2009/pr09072.html

BankUnited will be the successor bank, acquired and run by a private equity consortium. WE PAID FOR THIS PEOPLE. PRIVATE EQUITY GETS A SWEETHEART DEAL ON OUR BACKS.

The Deposit Insurance Fund is estimated to take a hit of $4.9 billion on this one. That brings the 2009 loss to over $10.3 billion. The FDIC reported a balance of just under $19 billion at the end of 2008.

It is a good thing Congress approved a credit line of up to $500 billion for the FDIC. That is what I mean about insuring your own deposit. If (When) the FDIC taps that line, the Treasury must issue debt to front the cash.

Failure #34 is a big one folks, another one off the Bad Banks list.

Failure Friday Fun

Please click on tables to expand.

Westsound Bank was the only one closed today. It was at the top of the Bad Banks list. How do you get to the top of the Bad Banks list?

Net Bad Loans Ratio

bad loans = assets at least 30 days delinquent + non-accrual assets

ratio = (bad loans - bad loans guaranteed by Federal Gov't) / (loan loss allowance + Tier 1 capital)

Net Non-Accrual Ratio

ratio = (non-accrual assets - non-accrual assets guaranteed by Federal Gov't) / (loan loss allowance + Tier 1 capital)


I modified the last column of the failure list:

ratio = (total deposits - FDIC loss) / total assets

Failure Friday: 4 More on the Pile

Four more closed today, the total for the year is now 29. Please click on tables to expand.

Failure Friday: #s 15 & 16 of 2009

Two more banks shuttered today, both of which were at the top of the revised (12/31/08 data) Bad Banks list.