Failed Bank Friday - 5 more down, $1.3B lost MTD

Another Five bite the dust - $473.9 Million lost this week/cost to the FDIC

Third week
Bank Name.......................Est Cost to FDIC
Premier American Bank..... $85,000,000
Columbia River Bank ........ $172,500,000
Evergreen Bank ................ $201,900,000
Charter Bank .................... $6,420,000

Second week
Bank of Leeton ...................... $8,100,000
St. Stephen State Bank .......... $7,200,000
Town Community Bank & Trust ..... $17,800,000
Barnes Banking Company ......... $271,300,000

First week
Horizon Bank .............................$539,100,000

Ref: www.fdic.gov...

[edit on 23-1-2010 by Dbriefed]

So readers know, that brings the total in 2009 and 2010 to 149 failed banks. As opposed to 25 in 2008. Were are near half the 2008 numbers, in less than one month. Scary stuff.

Recession? What recession? I only see the tidal wave of a great depression here.

Already feeling the pinch myself so I can expect others here are as well. Not fun let me tell you.

Good lord! How does a bank loose money like that?

My favourite thing is when I argue this with my father he doesnt debate he rolls the eyes and forths at the mess and uses condescending attitudes as he tells me of the americans travelling again and the deals on travel drying up. The fact that your population is tentimes our population just makes him even angrier. Getting into the distribution of wealth and who exactly is travelling is not grounds for debate.

The point of my little rant is that some people refuse to see what is happening.

149 banks disappearing is something that should concern everyone.

Cheers

Do not forget:- Billions lost does not mean money 'disappears'. It doesn't and right now, those billions are either hoarded up or re-invested in other products and circulated. One's loss is another's gain.

Banks fail and will continue to fail, but the money only goes somewhere. The trick now is to ensure it comes back to the american economy, a job the political administrators and economist must work on on the bigger numbers.

And for smaller numbers, it will be up to the american public ingenuity to earn that money through honest means, as it had done after WW2 right up to the moon landing. This is not a time to be depress, to moan, to weep, to roll over and play dead.

'When the going gets tough, the tough gets going' is an idiom that came from US. Now is the time to live up to the word as the world learns from the american masses.

Good lord! How does a bank loose money like that?

In short, construction and real estate loans that have gone bad. Banks lend money to borrowers for speculative real estate construction, and when the borrowers don't repay (for whatever reason, be it unemployment, overextended on the debt obligations, etc.), the bank is left holding the bag.

They paid top dollar for real estate assets, expecting a return in the form of repayment of principal and interest, and now these assets are devalued, the borrowers are bankrupt, and the bank doesn't have enough in reserve to cover these losses.

A lot of the loan portfolios of these banks were heavily concentrated in residential construction loans that turned sour.

Residential homebuilders built speculative residential real estate developments in droves - especially in south Atlanta, and the South in general. These developments were residential homes - sometimes whole new neighborhoods that were developed. There was a huge building boom - Houses were being built like crazy just a few years ago, and banks were lending money to just about anyone that wanted to build or purchase a house.

When the real estate market slowed down due to tightened credit for home buyers and less demand, these same residential homebuilders couldn't sell their lot inventory and home inventory, and many of these builders subsequently filed bankruptcy.

The builders could not afford to pay their residential construction loans, so they defaulted on these loan obligations.

The bank is left with houses - some not even completely built - and vacant lots - all of which have depreciated by sometimes as much as 40-50%.

The bank can't sell the houses in most cases, because the market isn't there - except for "bottom feeder" real estate investors that only want to buy the houses for pennies on the dollar.

Lots of these houses were also built for speculative investors that intended on flipping the house for a quick profit once the house was built. These investors have all now skipped town, or are unemployed, and have basically screwed the bank over by not making good on their loan obligations either.

Layman's example: I purchase a house for you - on your behalf - for $100,000. The house has a market value of $100,000, meaning there is no cushion or room for devaluation of the house. You put no money down, and you have terrible credit, and spotty work history. You sign a no income verification loan, and inflate your income on your loan application to persuade me that you are a good, low risk borrower. After about a year, you default on your loan with me and skip town. Now the house has been devalued due to a slowdown in the market, and the house is now worth only $75,000. I not only lost my $100,000, but now I have collateral worth less than what I originally paid - a $25,000 shortfall. You might have even trashed the house before you left, further devaluing the house even further.

New accounting rules called "mark to market" accounting, requires that the bank reflects the actual market value of the real estate asset that they have on the books. If they loaned $250,000 to a builder to build a home, and now that home is worth $100,000 - and the builder went belly up - then the bank now owns a piece of collateral (real estate) that is only worth $100,000. Multiply this effect by hundreds for a single bank, and you can see that they have (practically speaking) worthless assets on their books.

The bank regulators require that a bank keeps capital reserves on hand to mitigate against losses. When the losses mount, and the bank can't acquire enough deposits to make up for the shortfall, the FDIC steps in and shuts the bank down to protect the depositors.

The short answer is: Loosey-goosey lending, and a rapidly deteriorating real estate market that has spun out of control.

Brace yourself. This is only the beginning. You will see many, many more banks failing in the weeks ahead.

[edit on 23-1-2010 by CookieMonster09]

CNN makes me laugh, theyre reporting the 5th and 6th bank failures of the year, two small banks in florida and missouri... dumba$$es... cant even report the news right.. some media wing TPTB have... bunch of idiots... i thought bank failures were up to 9?

online.wsj.com...

Regulators seized five banks in Florida, Missouri, New Mexico, Oregon and Washington, lifting the total number of failures this year to nine as financial institutions struggle with loan defaults and a weak economy.

Two of the five institutions had assets of more than $1 billion.

Whoops, Bank of Leeton is bank 5 in the third week of the year...

Third week
Bank Name.......................Est Cost to FDIC
Premier American Bank..... $85,000,000
Columbia River Bank ........ $172,500,000
Evergreen Bank ................ $201,900,000
Charter Bank .................... $6,420,000
Bank of Leeton ................... $8,100,000

Second week
St. Stephen State Bank .......... $7,200,000
Town Community Bank & Trust ..... $17,800,000
Barnes Banking Company ......... $271,300,000

First week
Horizon Bank .............................$539,100,000

Ref: www.fdic.gov...

Just to compare, here are the bank failures for January 2009, total failures $0.814 Billion:

Fifth week (Jan 24-30)
Ocala National Bank ......... $99,600,000
Suburban FSB ................ $126,000,000
MagnetBank .................. $119,400,000

Fourth week (Jan 17-23)
1st Centennial Bank ......... $227,000,000

Third week (Jan 10-16)
National Bank of Commerce ......... $97,100,000
Bank of Clark County .................. $145,000,000

Second week (Jan 3-9)
No failures

First week (Jan 1-2)
No failures


[edit on 23-1-2010 by Dbriefed]