Last August I wrote a piece about “The Syk Falling” or the banking collapse. My position then reflected my belief that what the nation was facing at the time was NOT a banking collapse, but part of a free market boom and bust.
Shortly after I commented, the FDIC came out with their update in the hopes of providing a bit of stability to the market. The highlights they pointed to:
- bank profits are down 86%
- 117 banks and thrifts are considered to be in trouble
- 8500 banks reserved $50.2 billion to cover losses from bad mortgages
The results at that point were very ugly. By no means a total banking collapse. So what would be total collapse? How about the closure of 9000 financial institutions, much like 1930 to 1933? That is a collapse. What the public is seeing now is the “key” financial institutions facing rough times and having government money pumped into them. Even if the Top 5 banks failed – with trillions of dollars in securities under their umbrella – they would be picked up by other institutions and life would go on.
But back to “the sky is falling” mentality. Let’s look at just how bad bank industry is doing, based on number of closures this year… and you have 36. Not as bad as some may have you think.
For your records, here is the full list.
So, to sum it up, the economy and the banking industry face a number of hurdles. Interest rates are expected to say low in order to stimulate lending, and more banks will fail. But we are not at a system wide collapse.
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