We are now experiencing a banking system collapse. This should be headline news, but most Americans are more than happy to remain blissfully ignorant of what is going on as long as they get to watch “So you can think you can dance”. When the American Dream of owning your own home dies for tens of millions of Americans and the economy collapses, perhaps more people will start to care. It just blows me away how many people are floating down the river of de-nial.
In 2009, banks posted their sharpest decline in lending since 1942. This year delinquencies on real estate loans still remain a source of trouble. That's especially true at smaller and mid-sized banks. And with further declines in home prices, expected by many analysts, will cause more losses for banks.
According to the FDIC, at year’s end its problem list of US banks at risk of failing hit a 16-year high at 702. Approximately 10% of all banks in the US are now on the Federal Deposit Insurance Corporation’s list of problem banks. Last year, 140 federally insured institutions failed and were shut down by regulators. In contrast, the five years prior to 2008, only 11 banks failed. It was the highest annual number since 1992 during the peak of the savings and loan crisis. Last year's failures extended a string of collapses that began in 2008, triggered by loan defaults in the financial crisis.
The pace of bank collapses this year exceeds last year's. As of April 13, 2010 – 110 banks have failed. As a result of those failures and bank mergers, the number of FDIC-insured institutions fell to 7,932 in the first quarter. The latest list of problem banks from the FDIC now stands at 775. Seventy-three banks were added to the list since the end of 2009. That is nearly a 10% increase in less than 5 months.(And why do they announce bank closing late on Friday evenings?)
That's the first dip below 8,000 in the history of the FDIC, which was created in 1933. However, depositors' money – insured up to $250,000 per account – isn't at risk. But don’t worry because the FDIC is backed by the government. Now that makes me feel all warm and cozy. Page 30 of the Tower Report
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