Banking Crisis?

17 Banks since January 1, 2009 does not make a situation where you can claim banks are failing left and right. The fact is yes, there are more banks closing. But the closure of banks is more often a reflection of an FDIC insured bank not meting minimum standards. And in some cases as was the one the closed in Georgia a few weeks back, it was a case of the FDIC declaring that the bank "might" get into trouble due to a preponderance of CRA loans on its books.

It is certainly a faster clip than 2004 or 2007 4 and 3 respectively. But it isn't even remotely close to the failure rates of banks during the start of the Depression. It isn't the same as when FDR took office on March 4, 1933 and immediately declared a Bank Holiday to prevent dozens of banks failing every day. Nor is it even as bad as the Savings & Loan collapse.

The fact is the vast majority of FDIC insured state and local banks are fine and are in no need of even potential bailouts. The N.A. banks are shaky in so far as they are more exposed to the average national trend in real estate and commercial activity due to the very fact they are N.A. banks. As far as cash flows go there isn't much of an issue except when you get to the N.A. banks and the now non-existent investment charter banks. In fact, the shaky nature of the N.A. banks is almost directly a result of them snapping up the investment banks at bargain basement prices.



The issue is that the N.A. banks bought up their main rivals for commercial level banking at a really cheap price. But they didn't suspect the degree to which the mortgage backed securities were no longer fungible so the paper sheet balance was much worse than they suspected it would be.