Four banks fail, bringing 2009 tally to 44

I know that as soon as some people read this, they are going to blame Obama for the bank failures, even though this began under the Bush administration. But I don't blame Bush either. But I am going to get really hyperpartisan here.

It is Obama's fault.

But this began under Bush.

OK, then it's Bush's fault.

Bush did not dismantle the Glass-Steagall Act. That was done during the Clinton administration.

Damn, it's all Clinton's fault.

Not really, the bill that dismantled Glass-Steagall protections was sponsored by Phil Gramm.

Then it has to be all Phil Gramm's fault.

Actually, Democrats voted for it.

Those damn Democrats. Look what they did to our economy.

The Dems only voted for something that was put forward by a Republican Congress.

I hate those damn Republicans. they screwed us good.

Question to you - Who voted for those Democrats and Republicans?

Ummm, should I kill myself now or later?

Don't kill yourself. Just be a wiser voter next time.

Hey, it's all your fault, whoever you are.

This is America, and you have let me down.

Well, sorry about that. The Devil made me do it. It's his fault.

Thus continues the story of how the Reaganesque idea of taking a little responsibility for our actions has been squandered by us all. One person abandoning a little responsibility as an American does a little bit of damage. However, a LOT of people abandoning their responsibility as Americans results in what we are seeing all around us at the present time. It all added up. And the damage will never be fixed by hyperpartisan finger pointing.

It's nice to be an American, but being an American comes with a price. That price is called responsibility.

Discussion?

Article is here.

At the peak of the S&L banking crisis when more than 1,000 banks failed in 1988 and 1989, at a rate of more than 2 every business day for two consecutive years, the economy survived without going into a recession.

Today we have to figure in the Amateur in Chief Obama and his personal prescription for disaster that will come with the passage of his Cap on Trade, Growth, and Jobs, Bill as it ends all hope of economic recovery.
Look for many more banks to fail if Obama gets his way making the numbers from 1988 & 1989 look good in comparison.

He is keeping one promise.

January 2008... San Francisco Chronicle interview: Obama said: "Energy Prices Will Necessarily Skyrocket Under My Cap and Trade Plan"

And he lied about everything else.

Candidate Obama Sept. 12, 2008: "I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."

Recession is when your neighbor loses their job.
Depression is when you lose your Job.
Recovery is when Obama loses his job.

"You can always count on Americans to do the right thing—after they’ve tried everything else".
Sir Winston Churchill

danarhea said:

Thus continues the story of how the Reaganesque idea of taking a little responsibility for our actions has been squandered by us all. One person abandoning a little responsibility as an American does a little bit of damage. However, a LOT of people abandoning their responsibility as Americans results in what we are seeing all around us at the present time. It all added up. And the damage will never be fixed by hyperpartisan finger pointing.

It's nice to be an American, but being an American comes with a price. That price is called responsibility.

Click to expand...

So finger-point at the American people, then warn against finger pointing?

How does a bank failure have anything to do with responsibility?

Councilman said:

At the peak of the S&L banking crisis when more than 1,000 banks failed in 1988 and 1989, at a rate of more than 2 every business day for two consecutive years, the economy survived without going into a recession.

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The number of failed banks does not tell the whole story. Since the S&L crisis, the structure of the finance industry changed dramatically. Consolidation led to a smaller number of banks and far greater concentration of assets.

During the S&L Crisis, the total assets of failed financial institutions came to $519 billion. During the September 2007-present timeframe following the bursting of the U.S. housing bubble, 70 banks have failed with total assets of $455.4 billion. More banks will fail this year and likely next year, as bank failures typically lag the turn in the economy.

Furthermore, if one includes the assets of financial institutions that were liquidated (Bear Stearns and Lehman Brothers) and those put of taxpayer life support (AIG, Fannie Mae, Freddie Mac, Citibank, Bank of America, etc.)--institutions that would otherwise would likely have failed-- the figures vastly exceed those of the S&L crisis.

In fact, the government's failure to resolve the mega institutions that were put on taxpayer life support--basically close down, transfer assets to viable financial institutions (and in the case of the mega financial institutions, spread their good assets among a large number of viable financial institutions)--is quite different from the aggressive approach that was taken by the Resolution Trust Corporation during the S&L crisis. Such failure may well undermine the prospects of robust post-recession growth e.g., lead to a more anemic recovery than might otherwise be the case.

A just released report from the Bank for International Settlements states:

Past banking crises have taught us that early recognition of losses combined with quick, comprehensive intervention and restructuring is the key to a speedy recovery... Before normal lending can resume, bad assets must be disposed of and banks recapitalized, all in a transparent fashion. In contrast, during this crisis, resolution has proceeded slowly with the result that market participants have been unsure about the size and distribution of losses as well as about the timing of loss recognition... Ultimately, the reluctance of officials to quickly clean up the banks, many of which are now owned in large part by governments, may well delay recovery.

Finally, the International Monetary Fund recently estimated that U.S. asset writedowns by financial institutions will amount to $2.7 trillion.

Dav said:

So finger-point at the American people, then warn against finger pointing?

How does a bank failure have anything to do with responsibility?

Click to expand...

Unless I'm mistaken--and Danarhea can correct me if I'm wrong--Danarhea's point was that the current financial crisis is not a Democratic Party or Republican Party issue. Partisan posturing to blame the crisis on either party misses the cause of the crisis. A major cause was the explosion of debt.

Households played the leading role in leveraging up. From 1980-2005, household debt rose from 50.0% of GDP to 94.5% of GDP. During that time, household debt rose from $1.396 trillion to $11.738 trillion. Mortgage debt was the primary driver of the explosive growth in household debt and it was that debt that fueled the housing bubble that precipitated the financial crisis.

donsutherland1 said:

Unless I'm mistaken--and Danarhea can correct me if I'm wrong--Danarhea's point was that the current financial crisis is not a Democratic Party or Republican Party issue. Partisan posturing to blame the crisis on either party misses the cause of the crisis. A major cause was the explosion of debt.

Households played the leading role in leveraging up. From 1980-2005, household debt rose from 50.0% of GDP to 94.5% of GDP. During that time, household debt rose from $1.396 trillion to $11.738 trillion. Mortgage debt was the primary driver of the explosive growth in household debt and it was that debt that fueled the housing bubble that precipitated the financial crisis.

Click to expand...

Let me correct you because.......

Oops, never mind. You are right. You must have read my post. :mrgreen:

Danarhea, thank you for one of the clearest assertions on this subject. It is one I have been making for sometime in my research papers in comparisons of Asia and the United States and the West. Americans have forgot how to save for the future and how to live within their means. Instant gratification is going to have to become a thing of the past in order to rebuild this economy. China is building their own domestic consumerism and is having a hard time convincing their own people to buy the products they are making.

Regardless, great post.

Bottom line is we all dropped the ball,for failing to vote for a better person or party and then calling them and harassing them to have them vote for what is the best for our country.And we all failed by letting them stay in office after the next election.

Glass-Steegal? I don't think so. I blame the Fed for lowering interest rates when they should have been sky-high due to our lack of savings.

So does anyone think that when the FDIC comes in and bails out the depositors this could actually lead to inflation as more banks fail in the future?

Liz Peeps said:

So does anyone think that when the FDIC comes in and bails out the depositors this could actually lead to inflation as more banks fail in the future?

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It wouldn't lead to inflation since people were operating under the assumption that they had money in the banks. The FDIC giving them money wouldn't create inflation since the banks already did that via fractional-reserve. However, it does set a bad precedent and it puts the government on the hook for more debt.

phattonez said:

It wouldn't lead to inflation since people were operating under the assumption that they had money in the banks. The FDIC giving them money wouldn't create inflation since the banks already did that via fractional-reserve. However, it does set a bad precedent and it puts the government on the hook for more debt.

Click to expand...

Well inflation will persist regardless of assumptions. It also creates distortions in the economy because when you loan someone out money and they can't pay it back, it's a real loss and can't be papered over. If done on a great enough scale it could lead to imprudent investments and economy chaos as we saw with the housing bubble.

You make a good point with the fractional banking thing, that's kind of where I was going. I'm no fan of fractional banking or the FDIC.

Councilman said:

At the peak of the S&L banking crisis when more than 1,000 banks failed in 1988 and 1989, at a rate of more than 2 every business day for two consecutive years, the economy survived without going into a recession.

Today we have to figure in the Amateur in Chief Obama and his personal prescription for disaster that will come with the passage of his Cap on Trade, Growth, and Jobs, Bill as it ends all hope of economic recovery.
Look for many more banks to fail if Obama gets his way making the numbers from 1988 & 1989 look good in comparison.

He is keeping one promise.

January 2008... San Francisco Chronicle interview: Obama said: "Energy Prices Will Necessarily Skyrocket Under My Cap and Trade Plan"

And he lied about everything else.

Candidate Obama Sept. 12, 2008: "I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."

Recession is when your neighbor loses their job.
Depression is when you lose your Job.
Recovery is when Obama loses his job.

"You can always count on Americans to do the right thing—after they’ve tried everything else".
Sir Winston Churchill

Click to expand...

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I agree, in the few months Obama has been in he has single handedly crippled the U.S.A.:roll:
:2funny::2funny::2funny::2funny:
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Suggestions for a speedy recovery:
Buy perscriptions from Wally World.

Liz Peeps said:

Well inflation will persist regardless of assumptions. It also creates distortions in the economy because when you loan someone out money and they can't pay it back, it's a real loss and can't be papered over. If done on a great enough scale it could lead to imprudent investments and economy chaos as we saw with the housing bubble.

You make a good point with the fractional banking thing, that's kind of where I was going. I'm no fan of fractional banking or the FDIC.

Click to expand...

Well of course we're going to have inflation, but I don't think that the FDIC is going to be a significant contributor to it. The Fed's low interest rate and quantitative easing are doing a lot more damage than the FDIC would do.

phattonez said:

Well of course we're going to have inflation, but I don't think that the FDIC is going to be a significant contributor to it. The Fed's low interest rate and quantitative easing are doing a lot more damage than the FDIC would do.

Click to expand...

I wouldn't entirely agree. One of the reasons I think the FDIC insurance program is such a bad idea is because it bails out depositors of insolvent banks. Nobody cares anymore what the banks do with our money once they have it, nobody cares because everyone thinks the FDIC insurance program will do that for us. We do more research on what kind of plasma TV to buy than what bank deserves our capital. This is one of the reasons the banking system is in such **** condition today. This is also instrumental in causing the malinvestments I'm sure you have read about. The Fed playing around with the interest rates is terrible, but they do that through the banks which would popping out of existence left and right if not for the FDIC program assuring everybody that no bank is necessarily safer than another. This allows ****ty banks with terrible business practices to remain in business at the expense of safer, more conservative banks. Not to say that safer conservative banks don't exist, but they are greatly outnumbered by the insolvent Fed pumped banks. We wouldn't have nearly a problem with fractional banking if we let depositors get wiped when the bank they chose made poor decisions with their savings.

So who is causing inflation? The Fed obviously, but their inflation is only made possible with government backed insolvent banking practices. Again, people only support these insolvent banks because the FDIC removes the element of fear and tries to remove fear from the market. Greed drives people to do risky things, but their behavior is kept in check by their fear. If people actually had to think about where they should park their money (and those smart enough to figure out what the heck a Dow Jones Industrial Average is will probably not be lumping their savings into the US banks) then we might actually have a more stable economy.

But, as I'm sure you already know, the Fed and the FDIC are just two of many, many problems with our economy. I'm sure you already know all of this, I'm just bringing this up for the benefit of the viewing audience who may not really be aware of this stuff.

Liz Peeps said:

I wouldn't entirely agree. One of the reasons I think the FDIC insurance program is such a bad idea is because it bails out depositors of insolvent banks. Nobody cares anymore what the banks do with our money once they have it, nobody cares because everyone thinks the FDIC insurance program will do that for us. We do more research on what kind of plasma TV to buy than what bank deserves our capital. This is one of the reasons the banking system is in such **** condition today. This is also instrumental in causing the malinvestments I'm sure you have read about. The Fed playing around with the interest rates is terrible, but they do that through the banks which would popping out of existence left and right if not for the FDIC program assuring everybody that no bank is necessarily safer than another. This allows ****ty banks with terrible business practices to remain in business at the expense of safer, more conservative banks. Not to say that safer conservative banks don't exist, but they are greatly outnumbered by the insolvent Fed pumped banks. We wouldn't have nearly a problem with fractional banking if we let depositors get wiped when the bank they chose made poor decisions with their savings.

Click to expand...

I see what you mean now. FDIC leads people to put money in those banks with lower reserve ratios. We know that fractional reserve creates inflation. So because those banks will get bigger faster than the more conservative banks, and because FDIC removes any fear with putting our money in those banks, FDIC effectively adds to inflation.

Liz Peeps said:

So does anyone think that when the FDIC comes in and bails out the depositors this could actually lead to inflation as more banks fail in the future?

Click to expand...

Liz Peeps,

The issue to which you refer is moral hazard, not inflation. An institution that expects to be bailed out if it runs into difficulty is, on average, more willing to engage in greater risk in the pursuit of marginal profits than one that does not expect a bailout.

donsutherland1 said:

Liz Peeps,

The issue to which you refer is moral hazard, not inflation. An institution that expects to be bailed out if it runs into difficulty is, on average, more willing to engage in greater risk in the pursuit of marginal profits than one that does not expect a bailout.

Click to expand...

They're both connected and the FDIC does cause inflation. When it takes over a bank and bails out the depositors new money has to either be created or taken from the FDIC funds (which will get lower and lower as more banks go out of business). Keeping in mind the FDIC funds come from banks which are already a channel for inflation by borrowing money from the Federal Reserve at killer rates and keeping low reserve ratios while at the same time making bad decisions with their depositors money. So the insurance program creates a moral hazard, but the end result is more inflation. Especially when those funds run out. They raised the cap of FDIC coverage to a quarter million and Congress had to authorize a half trillion line of credit to the FDIC, which if of course being financed by our foreign creditors. Once our foreign creditors bail out and stop throwing their value away into the toilet of the US government and US dollar, then the inflation will be very apparent.

FDIC Fund Running Dry - Yahoo! Finance