Someone left the vault open in Georgia. Three (3) more Georgian banks were among the 6 banks seized by the FDIC on Friday. If the lights aren’t already out in Georgia, they’re certainly dimming!
Bank failures had been benign the previous three weeks. Four fell in the three weeks prior to this one. The six banks closed Friday brought the total to 130 U.S. banks this year. Of the 130, Georgia now has had 24 of those; 18% of the nations failed banking institutions.
The Wall Street Journal has an incredible, up-to-date web page that keeps track of the failed banks: “Failed Banks – The Wall Street Journal Online.” You can follow the bank failures there or at the FDIC website.
In a development last week, a week in which the FDIC had no bank failures, they released the number of banks on the watch list for the third quarter. The list of those banks the FDIC is monitoring grew to a startling 552 from last quarter’s 416 banks under the watchful eye of the banking regulators.
The increase of 33% has gone practically unnoticed by the markets and the media, which is perplexing. Like the watch list, another disturbing increase was evident in the noncurrent loans rate.
Noncurrent Loan Rates for all 13,080 banks insured or supervised by the FDIC, continue to deteriorate increasing for 13 straight quarters to 4.94% of all loans. In the third quarter of 2005 the noncurrent loan rate was one half of one percent (.51%).
But getting back to the closures over the last four weeks. Not to be out-done by Georgia the state of Florida lost 3 banks, one each in Sarasota, Naples, and Fort Myers. California lost one in San Clemente. Illinois lost another in Aurora. Florida now has 12 failed banks, California 16, and Illinois 20 so far this year.
The long stable AmTrust Bank in Cleveland, Ohio, was the oldest and largest of the 6 banks to succumb on Friday. Established in 1889, the hundred and twenty year old bank will cost the Federal Deposit Insurance Fund an estimated $2,000,000,000. The shared loss agreement with New York Community Bank is approximately $6,000,000,000.
The FDIF, the Federal Deposit Insurance Fund, will suffer a loss of approximately $3.4 billion for the 10 banks they assumed from November 13th through December 4th. The shared loss provision totals nearly $7 billion. The FDIC’s share, should all of the bad assets fail, would be $3.5 billion. Of course, not all of the toxic assets will default, but the loss to the fund could still be considerable.
As the end of the disastrous year approaches, 150 banks may have failed, bringing the two year total to 176. Even if the total reaches 150 by year’s end, it is much better than the earlier estimations of 180 to 200, but is still a disturbing number of failures.
Georgia is hurting, but had it not been for ‘the government,’ the Georgian banking system would have collapsed.
The problems in Georgia are evidence that a ‘free market,’ unregulated banking system is failing. The intervention of the FDIC; a social program set-up in the 1930’s by a visionary government, has prevented a Depressionesque failure in the state of Georgia.
Needless to say, if only the the regulatory agencies had been able, or willing, to do their job we may have averted this banking morass.