Bank Failure Friday - FDIC closes 6 Banks Jan. 22, 2010

[wwswimming]

nothing at Drudge or Yahoo Finance yet.
http://biz.yahoo.com/top.html

nothing at Bloomberg yet
http://www.bloomberg.com/?b=0

but ... if you look at the FDIC site -
http://www.fdic.gov/bank/individual/failed/banklist.html

... they closed 6 banks Friday January 22, 2010.

Question #1 - how will this affect the stock markets ?

this is what Bloomberg had to say about the last 3 days of falling stock prices -
http://www.bloomberg.com/apps/news?pid=20601087&sid=aowCpRWRZ27Q&pos=1

"U.S. Stocks Tumble to Cap Biggest 3-Day Plunge Since March

Jan. 22 (Bloomberg) -- U.S. stocks sank, capping the market’s biggest three-day tumble since March, as financial shares slumped on President Barack Obama’s plan to rein in banks and results at Google Inc. disappointed investors."

They're not mentioning some of the other (wilted) green shoots -
* unemployment rose last month in 43 states
* the mortgage delinquency rate continues to rise - it's at 9% nationwide, and climbing.

as far as the earnings, i feel they're mis-spinning the earnings reports. Google, Intel, Southwest Airlines etc. all reported robust earnings (as did many other companies I'm not mentioning) - the stock market is not falling because of disappointment over earnings reports.

Presumably the news about the FDIC closing 6 banks yesterday will make it to the mainstream media by Monday.

I have a feeling the stock markets will not be a happy camper the next 2 weeks.

 

[StageLeft]

http://www.fdic.gov/bank/individual/failed/banklist.html

They closed a veritable crap load last year, though, so it seems status quo at the moment.

I'd like to point out that Obama's banking speech accelerated the decline we saw last week but it merely accelerated it, did not prompt it. The day before his speech it had dropped a good bit but recovered most of it by day's end.

 

[Special K]

Would small local/regional bank failures really have much effect on the stock market? There were bank failures going on throughout 2009, and they didn't seem to have much effect on the rally that started in March.

 

[soccerballtux]

Market down has a lot more to do with foreign credit bubbles than Obama's idea, FDIC closings, and housing over here.

We've been closing banks consistently like this over the last 5 months.

 

[wwswimming]

The FDIC team that closes banks is like a moveable assembly line. An assembly line of people handling financial assets.

I don't know what their full capacity is - the most banks they've managed to close in one Friday. I know I've heard numbers higher than 6.

Anyway, they work as teams. I think the field teams (that go to the banks being closed) are 6-10 people in size.

They do the prep work, aided by co-workers, at FDIC offices. Then the play starts, and the field team shows up at the bank Friday PM and do their thing.

I wonder if their bosses buy them pizza ?

It would be interesting to watch. As long as it's not my money in the bank.

In terms of a barometer of economic health, the FDIC seizing and assigning banks at an accelerated rate (a rate higher than historic norms) is definitely a usefull measure.

It sort of ties in with the steadily increasing mortgage foreclosure rate (7% in 2007, 8% in 2008, 9% in 2009 - that's the shape of the curve).

What many large banks have done is get in the practice of selling their loans as mortgage-backed securities. In the face of rising defaults, it's the banks holding the mortgages and the holders of the mortgage backed securities that take the financial haircut.

 

[Special K]

The FDIC team that closes banks is like a moveable assembly line. An assembly line of people handling financial assets.

I don't know what their full capacity is - the most banks they've managed to close in one Friday. I know I've heard numbers higher than 6.

Anyway, they work as teams. I think the field teams (that go to the banks being closed) are 6-10 people in size.

They do the prep work, aided by co-workers, at FDIC offices. Then the play starts, and the field team shows up at the bank Friday PM and do their thing.

I wonder if their bosses buy them pizza ?

It would be interesting to watch. As long as it's not my money in the bank.

Check out this episode of This American Life:

http://www.thisamericanlife.org/Radio_Episode.aspx?sched=1289

Act Two reports on the story of what actually happens when a bank is taken over by the FDIC. I thought it was pretty interesting.

 

[soccerballtux]

Most interesting is the DIF is broke. They have a $500B line from the Fed should they need it, however the unofficial problem bank list is just shy of 600 banks, totalling ~$300B in assets.

It's not going take much more of a shakeup for everything to go haywire.
Which it will.

 

[Hacp]

Banks took too much risk. They expected to get bailed out by the federal government. Now threaten to take the CEO's house and car away if the bank fails and you won't have many bank failures. The corporate charter encourages people to take outsized risk and harm the taxpayer.

 

[soccerballtux]

Banks took too much risk. They expected to get bailed out by the federal government. Now threaten to take the CEO's house and car away if the bank fails and you won't have many bank failures. The corporate charter encourages people to take outsized risk and harm the taxpayer.

Don't forget GM.

I'm with you.

 

[Ozoned]

http://www.fdic.gov/bank/individual/failed/banklist.html

They closed a veritable crap load last year, though, so it seems status quo at the moment.

I'd like to point out that Obama's banking speech accelerated the decline we saw last week but it merely accelerated it, did not prompt it. The day before his speech it had dropped a good bit but recovered most of it by day's end.

The market looks at probable future events. It is highly likely that some of the events of last week were big game changers.

I am dumping anything even remotely tied to cap and trade. GE and BNSF were the 1st to go.

 

[Zebo]

America is shutting down and will continue to shut down until money gets back on main street. Benny the B won't even be able to fool those communication Majors at CNBC soon as fewer and fewer will be able to afford to simply maintain a home much less buy one.

The granddaddy of all bubbles is the government bubble and risks or solvency as a nation. As this economy slows on itself more and more will lose their jobs contracting tax receipts to such low levels that government will be unable to function in its present form. They will have limited choices all terrible.

 

[Zebo]

You give investment banks, instead of real banks which they took over, fed money at zero they are going to do what they know, speculate in markets, Absolutely nothing to do with forward looking but manipulating. Now they got y'all back time for some profit taking. Where else will the real money go? Would you start a business when people have no money to spend? I wouldn't care to predict the wall street casino except to say short term profit taking, Could be at 14K in two months after that. Doesn't materially change the issues.

 

[soccerballtux]

America is shutting down and will continue to shut down until money gets back on main street. Benny the B won't even be able to fool those communication Majors at CNBC soon as fewer and fewer will be able to afford to simply maintain a home much less buy one.

The granddaddy of all bubbles is the government bubble and risks or solvency as a nation. As this economy slows on itself more and more will lose their jobs contracting tax receipts to such low levels that government will be unable to function in its present form. They will have limited choices all terrible.

http://globaleconomicanalysis.blogspot.com/2010/01/hoschton-georgia-dissolves-police.html

laying off the police force [entire] to save money

 

[soccerballtux]

You give investment banks, instead of real banks which they took over, fed money at zero they are going to do what they know, speculate in markets, Absolutely nothing to do with forward looking but manipulating. Now they got y'all back time for some profit taking. Where else will the real money go? Would you start a business when people have no money to spend? I wouldn't care to predict the wall street casino except to say short term profit taking, Could be at 14K in two months after that. Doesn't materially change the issues.

You don't need to worry quite about that, nobody is speculating in the markets. All those excess reserves are just sitting there-- because no banks know who they can trust and who they can't-- suspension of mark to market accounting.

Also, FOMC does not allow continued borrowing for the purpose of speculation. They do not allow continued borrowing, period.

 

[Vic]

Banks took too much risk. They expected to get bailed out by the federal government. Now threaten to take the CEO's house and car away if the bank fails and you won't have many bank failures. The corporate charter encourages people to take outsized risk and harm the taxpayer.

The FDIC is funded by depositors, not taxpayers.

 

[dmcowen674]

how will this affect the stock markets ?

You should know by now the stock market is just a Monopoly game for the super wealthy.

 

[LegendKiller]

http://globaleconomicanalysis.blogspot.com/2010/01/hoschton-georgia-dissolves-police.html

laying off the police force [entire] to save money

As noted in the article, the town was already covered by the Sheriff's office. Thus, they had double coverage for a very small town, something which isn't really needed.

Why pay double for no real benefit? This type of thing needs to be found everywhere, trim the fat so this country can become leaner and meaner. It isn't shutting down, it is justifying expenses.

 

[Hacp]

The FDIC is funded by depositors, not taxpayers.

And when the banks go broke and won't pay the fees who do you think the FDIC will turn to? Yep, they have a loan agreement with the treasury. They can borrow as much as they like form the treasury if they need.

 

[soccerballtux]

As noted in the article, the town was already covered by the Sheriff's office. Thus, they had double coverage for a very small town, something which isn't really needed.

Why pay double for no real benefit? This type of thing needs to be found everywhere, trim the fat so this country can become leaner and meaner. It isn't shutting down, it is justifying expenses.

Oh I didn't catch that.
I thought the town residents were just going to buy shotguns and call it a day.
Which would be cool too.