Friday, September 18, 2009

Sick Minibanks

"The banking industry continues to deteriorate, with federal regulators adding 111 lenders to their list of endangered banks in the latest quarter, even as the economy is stabilizing. Data released Thursday painted a gloomy picture of the state of banking. ... The [FDIC] said it had 416 banks on its 'problem list' at the end of June, equivalent to about 5% of the nation's banks, up from 305 at the end of March and 117 at the end of June 2008. Problem banks had a combined $299.8 billion in assets at the end of June, compared with $78.3 billion a year ago", Damian Paletta and David Enrich at the WSJ, 28 August 2009, link:

Big deal, these are small banks, averaging $721 million each in assets. Conspicuosly no large banks are on the list. Why?

1 comment:

Anonymous said...

From Bloomberg:

After the deepest recession since the 1930s, which has seen the world’s largest economy shrink 3.9 percent since the second quarter of last year, and more than $1.6 trillion in worldwide losses and writedowns by banks and insurers, President Barack Obama decided on a policy of containment rather than a structural transformation.

His proposal for revamping the way the U.S. monitors and controls banks doesn’t include taking apart institutions, supported by taxpayer loans, that have grown in scope and size since Lehman imploded. The biggest, Charlotte, North Carolina- based Bank of America, had $2.25 trillion in assets as of June, 31 percent more than a year earlier, and about 12 percent of all U.S. deposits.

Creating Bedlam

Instead, the Obama plan would label Bank of America, New York-based Citigroup and others as “systemically important.” It would subject them to capital and liquidity requirements and stricter oversight, relying on the same regulators who didn’t understand the consequences of a Lehman failure. And while companies could be dismantled if they got into trouble, they, their creditors and shareholders could also be bailed out with taxpayer money, according to the plan.

The chief architects, Geithner, 48, and National Economic Council Director Lawrence H. Summers, 54, say they don’t think it would be practical to outlaw banks of a certain size or limit trading activities by deposit-taking banks, according to people familiar with their thinking. They said the two men, who declined to be interviewed, and others on Obama’s team believe the lines are too fuzzy between banking and investing products and that forcing the divestiture of units and assets would create bedlam.

“It’s a very difficult thing to say as a national policy goal that we’re going to limit the success of an American firm,” (Ed. note/ hahaha how much do they pay this shill?) said Tony Fratto, 43, a spokesman for President George W. Bush and former Treasury Secretary Henry M. Paulson who now heads a Washington consulting firm.