Dedicated to Deposits: Deals, Data, and Discussion

FDIC's Third Quarter Report - Number of Problem Banks Increased to 552

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The FDIC released its third quarter report on the banking industry. Here are some of the noteworthy excerpts from the press release:
  • [FDIC-insured banks] reported aggregate net income of $2.8 billion in the third quarter of 2009, but loan balances declined by the largest percentage since quarterly reporting began in 1984
  • Net interest margins improved to a four-year high
  • At the end of September, there were 552 insured institutions on the "Problem List," up from 416 on June 30
  • Total assets of "problem" institutions increased during the quarter from $299.8 billion to $345.9 billion
  • Fifty institutions failed during the third quarter, bringing the total number of failures in the first nine months of 2009 to 95
  • FDIC's Deposit Insurance Fund (DIF) balance – or the net worth of the fund - fell below zero for the first time since the third quarter of 1992
  • The fund balance of negative $8.2 billion as of September already reflects a $38.9 billion contingent loss reserve that has been set aside to cover estimated losses over the next year.
  • Total insured deposits increased by 10 percent ($491.5 billion), reflecting new data collected on the temporary increase in the standard maximum FDIC deposit insurance amount from $100,000 to $250,000.
The FDIC doesn't point out the problem banks. CalculatedRisk Blog has an unofficial list of over 500 problem banks based on public enforcement actions.

According to Chairman Bair, they should be able to handle future failures through 2010 thanks to the recent prepay assessment that banks will have to pay:
To further bolster the DIF's cash position, the FDIC Board approved a measure on November 12th to require insured institutions to prepay three years worth of deposit insurance premiums – about $45 billion – at the end of 2009. "This measure will provide the FDIC with the funds needed to carry on with the task of resolving failed institutions in 2010"

One thing that's helping improve the banks' profits (and hurting savers) is the interest margins. According to the press release:
Net interest margins improved to a four-year high. The average margin (the difference between the average yield on interest-earning assets and the average interest expense of funding those assets) rose to 3.51 percent from 3.48 percent in the second quarter and 3.37 percent in the third quarter of 2008.

In addition to the quarterly report, the FDIC updated its database with the banks' financial data for the end of the third quarter. Ratings services like BauerFinancial and Bankrate.com use this data for their star ratings. Recent ratings have been based on 6/30/09 data. Their new ratings based on 9/30/09 data should be out soon. BauerFinancial has typically been the first to include the new data.


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Comments
11 Comments.
Comment #1 by MayorQuimby (anonymous) posted on
MayorQuimby
FDIC is over $8 billion negative btw. Technically - there's nothing backing our cash.

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Comment #2 by Anonymous posted on
Anonymous
There hasn't been anything backing our cash since the U.S. went off the gold standard.

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Comment #3 by Anonymous posted on
Anonymous
The smaller banks are being clobbered by the big fish. Why, it is very simple.
Big banks can borrow at bear zero interest rate and can lend at %4.74 and make a profit. Smaller banks must pull in cash via CD, savings and checking accounts, which cost them between %2-3 of the %4.74 lending rate. No bank can survive on 2 point spread or margin. And there is the trouble in all of those 552 banks or more not yet listed.

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Comment #4 by MayorQuimby (anonymous) posted on
MayorQuimby
"There hasn't been anything backing our cash since the U.S. went off the gold standard."

Yes there is - your future labor/energy.

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Comment #5 by Anonymous posted on
Anonymous
To posters at 12:40 PM, November 24, 2009 and 11:18 AM, November 24, 2009:

We will always get the money, but at what value is uncertain. Congress pledged the future generations as subservient providers and payers to the national debt. If that plan is abandoned or does not work as planed, then there is no way we will get our money at face value.

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Comment #6 by Anonymous posted on
Anonymous
Mayor Quimby.

You first said that there's nothing backing our cash. Then you later said that the future labor/energy is backing the cash. That sounded like a flip-flop.

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Comment #7 by MayorQuimby (anonymous) posted on
MayorQuimby
No - I said "technically" there's nothing backing our cash. The Treasury will make FDIC whole repeatedly but there is no mandate or law requiring it to.

In reality, future taxation of workers is backing everything via the Treasury which issues bonds that we all work hard to pay interest on (to China, England etc.). In fact it is our future labor and energy.

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Comment #8 by Anonymous posted on
Anonymous
Bottom Line: Nothing is secure these days. Everybody is in the water, one inch or a foot is just a matter of degree.

Strategy: Play it safe and on alert be agile for emergency changes.

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Comment #9 by Anonymous posted on
Anonymous
If anyone thinks our "future labor" is part of what is backing the U.S. dollar, they don't really understand financial system.

That is why the price of GOLD is going through the roof right now!
U.S. currency has NO backing. The poster at 4:05 AM got it right.

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Comment #10 by MayorQuimby (anonymous) posted on
MayorQuimby
"If anyone thinks our "future labor" is part of what is backing the U.S. dollar, they don't really understand financial system.

That is why the price of GOLD is going through the roof right now!
U.S. currency has NO backing. The poster at 4:05 AM got it right."

You are the one that doesn't understand the system. Go read up and get back to us. Money is Federal Reserve debt issued on the back of Treasury debt, funneled through banks (with attached interest) and 'lent' to all of us. We need to WORK to pay back the interest on one side and on the other side we are taxed. The best part is that money devalues - BY VIRTUE of the fact that we work and need to spend it. It's called inflation. So we're given devaluing dollars for our labor, we're taxed on top of that and finally have to pay INTEREST on these devaluing dollars that we 'borrow' from banks. THAT's the system. And now - since the FDIC is broke, we 'technically' don't have a guarantee that our 'money' is even IN the bank since so many of them lent imprudently.

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Comment #11 by MayorQuimby (anonymous) posted on
MayorQuimby
http://video.google.com/videoplay?docid=-2550156453790090544&ei=_DwNS660FYvGqwKc3aCsBg&q=money+as+debt&hl=en&client=safari#

http://en.wikipedia.org/wiki/Fractional-reserve_banking

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