Posted by Hugh Nations Signing Agents of Austin on 7/14/08 12:34pm
Msg #255116

Bank failures

When I was a kid, bank failures were a rarity, and because of that, they were big news. Two or three times a year, there would be a short story on the front page of the local newspapers about a small bank in some place like Dunghill, AL, having gone under. The second paragraph would always be quoting the FDIC that no one would lose their money because the accounts were federally insured. In 1950, the year I entered high school, there were four failures. The year I graduated, there were two. My junior year at Baylor, there was one.

How times have changed; or, maybe I should say, how times are about to change again.

We have gone for most of the 21st Century with figures on bank failures similar to the mid-20th Century: two, four, maybe seven a year, and in 2002, a startling 11 failures. Coming after the bleak years of the '80s and '90s, though, when hundreds of banks and thrifts failed in the wake of deregulation, the first eight years of the century have seemed relatively serene.

Now, experts tell us that we can anticipate a wave of failures similar to, if not of the tsunamic proportions of the Great Depression and the closing years of the 20th Century. Nonetheless, I'm afraid the impact might be even greater. The government's credit is stretched to the breaking point, and I have grave reservations that it can easily accomodate the hundreds of billions of dollars, perhaps stretching into the trillion(s), needed to keep the financial system afloat. That's probably going to mean tight, tight credit, which inevitably means far fewer loans to close.

The last breakdown occurred when too many thrifts built too many shopping centers and wanted not only a piece of the financing pie, but also an interest in the centers themselves. That impacted the residential lending market. The coming breakdown centers directly on residential lending, and I suspect will impact it far more severely.

Applications for greeters can be found at any Wal-Mart. This may be one time when it helps to be an Olde Phart.

Reply by Linda Juenger on 7/14/08 12:41pm
Msg #255118

I'm sure its the same all over, but here in the midwest, there is a new bank being built on just about every corner. Our small town of 5,000 has 2 new banks this year alone. We already have 3 plus a credit union. How in the world do all these banks survive in such a small town. The surrounding area around me is growing leaps and bounds right now and there are scores of new banks being built. I just don't get it.

Reply by Lee/AR on 7/14/08 12:59pm
Msg #255122

That makes 2 of us, Linda

My dinky town is not only the county seat, but the largest town in the county. A whole 12,000 people....with 24 banks...well over half built in the last 5 years. Whole town was totally amazed when a new building going up on a pricey corner location turned out to be a Walgreen's...and not another bank!

Reply by Marlene/USNA on 7/14/08 12:54pm
Msg #255120

Are you talking true failures, Hugh, or mergers and acquisitions as well? It seems like an appalling number of failures.

I don't know facts or figgers, but my sense is that when a bank is heading for trouble, it is snatched up by a bigger bank.

I found a 10-year-old CD last week misfiled in my papers and finally managed to track the bank through 2 acquisitions and 1 name change - a teeny, little hometown savings bank in Ohio is now a branch of a megabank headquartered who-knows-where.

Reply by OR on 7/14/08 1:37pm
Msg #255128

Re: Bank failures=heres a link to an aol article

http://www.bloggingstocks.com/2008/07/14/profiting-from-the-150-banks-that-will-fail-next/

Reply by Marilynn Wells on 7/14/08 2:45pm
Msg #255136

Yes--it's all over the news & the news is not good. Of course, the lesson learned from the Depression was supposed to be that if people panic and put a "run" on the bank--withdrawing their money--that is what would cause the bank to fail. From all reports, that is exactly what the Fed did on Friday with IndyMac, when FDIC took over. I saw the news this morning that they were open for business today. The safeguard of the FDIC only insures up to $100,000. When fear takes over this is nothing but panic & chaos. It looks like that's what's happening on Wall Street, as well. It seems clear that the mortgage meltdown as it is being called is far from over. I wonder how long any of us will be around as signing agents to talk about it.

Reply by WDMD on 7/14/08 4:10pm
Msg #255146

Reassuring words from the conservator of IndyMac

"Q: Is my bank at risk?

A: John Bovenzi, the former chief operating officer of the FDIC put in charge of IndyMac, reassured consumers late Sunday that bank failures have been rare in the past, and that if more banks do fail, the government has enough in reserve. According to regulatory policy, there is no advance notice given to the public before a bank's assets are seized by federal regulators.

"I think the important point to make is that, historically, only a very small percentage of the banks on our problem banks list ever failed," Bovenzi said on CNN. "While there are 90 banks on the list, there would be no expectation that 90 of those banks would fail."

According to the FDIC, IndyMac is the fifth U.S. bank or thrift that has failed this year. In 2007, only three financial institutions failed, a small number when compared to the 2,808 institutions that failed between 1982 and 1992."

Link to article: http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080714&id=8890587

Reply by Gerry_VT on 7/14/08 6:19pm
Msg #255159

Reassuring if you're have less than $100,000

In simple cases, you are only protected up to $100,000. You may be able to extend this by having joint accounts and trusteeships in various name combinations. If you receive a check on an account with a balance over $100,000, it might bounce.

Reply by WDMD on 7/14/08 6:29pm
Msg #255161

Re: Reassuring if you're have less than $100,000

The main point being that there are not thousands of banks ready to fail.

Reply by Hugh Nations Signing Agents of Austin on 7/14/08 10:28pm
Msg #255191

Re: Reassuring if you're have less than $100,000

***The main point being that there are not thousands of banks ready to fail***

2,808 banks failed over 11 years between 1982 and 1992.

No, there may not be thousands on the verge of failure right now. But neither were there thousands on the verge of failure in 1982.

Reply by sue_pa on 7/14/08 8:28pm
Msg #255175

Re: Reassuring if you're have less than $100,000

we can assume (I know) that people who have $100,000 to stick in a BANK account are smart enough to know the $100,000 limit and would spread their funds among various banks.

Reply by PAW on 7/15/08 8:57am
Msg #255210

Re: Reassuring if you're have less than $100,000

Many people with more than $100 grand to put in a bank, don't. They invest their money in other insured (and risky) ventures.

Reply by JanetK_CA on 7/15/08 10:12pm
Msg #255327

Re: Reassuring if you're have less than $100,000

Well, one would think, but apparently, one would be wrong! I've been amazed at how many people waiting in the long lines have been interviewed on radio and TV here who said they didn't know and are concerned about the amounts over $100K that they've had in an IndyMac account. I hope they were in different accounts and they just didn't realize it, as there are lots of ways to set it up to get around those limits.