Bank Failures Show No Sign Of Stopping – Taxpayers Pick Up The Tab

By on September 28, 2010 in News 8

The Wall Street Journal attracted a lot of attention yesterday with the headline “Banks Keep Failing, No End in Sight.” If you’ve been reading Danny Schechter’s posts about the never-ending recession and financial crisis, it may not come as a surprise, but if you drank the “Recession’s Over” Kool Aid being dispensed in Washington, it might surprise you to learn that since big fish Washington Mutual went bust, 279 more lenders have collapsed, and counting:

The largest number of bank failures in nearly 20 years has eliminated jobs, accelerated a drought in lending and left the industry’s survivors with more power to squeeze customers.

Some 279 banks have collapsed since Sept. 25, 2008, when Washington Mutual Inc. became the biggest bank failure on record. That dwarfed the 1984 demise of Continental Illinois, which had only one-seventh of WaMu’s assets. The failures of the past two years shattered the pace of the prior six-year period, when only three dozen banks died.

Two more banks went down last Friday, and failures are expected to “persist for some time,” according to a report issued Tuesday by Standard & Poor’s. In the second quarter of this year, the Federal Deposit Insurance Corp. increased its number of problem banks by 6% to 829.

Between failures and consolidation, the number of U.S. banks could fall to 5,000 over the next decade from the current 7,932, according to the top executive of investment-banking firm Keefe, Bruyette & Woods Inc.

The upside of failures is that they can represent a healthy cleansing of a sector that grew too fast, with bank assets more than doubling to $13.8 trillion in the decade that ended in 2008. Many banks that failed were opportunistic latecomers. Of the failed banks since February 2007, 75 were formed after 1999, according to SNL Financial.

Still, economists say, the contraction represents an enduring threat to capital, lending and the economy…

[continues in Wall Street Journal]

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  • Liam_McGonagle

    This slow bleed could last maybe for decades, for reasons discussed at more length at http://www.disinfo.com/2010/09/how-bp-could-trigger-another-economic-meltdown/

    But that could just turn out to be a blessing in disguise. It could give society an opportunity to manage a “controlled” collapse. I suppose that all depends on the likelihood of competing scenarios:

    1. Economic stagnation gives folks more time to adequately engage in public policy analysis. They accept that just like Soviet-style Communism, Laissez Faire Capitalism just done offed itself, and they will not be placated by the half-masticated leftovers of the uber-rich. And out of some hidden reserve of human decency, if not fear of a nasty social revolution, the uber-wealthy make the necessary concessions and ultimately come to realize that they, too, prefer a society with less glaring inequalities in standard of living.

    2. Too late. The public’s collective brains have been irredeemably scrambled by perverse fantasies that each of us individually is a entity completely viable on its own terms with little or no need to cooperate with one another. Education comes to be seen only as inquiry into best practices for plundering others, and the sciences accordingly are not able to sustain the robust levels of innovation needed to counteract the steady decline in natural resources.The already incredibly sick dynamic of the Patronage Society really begins to kick into gear and the American experiment degenerates into fascistic dictatorship or outright medieval warlordism.

    • emperorreagan

      I’d put $100 on #2.

      Wait.

      20 lbs each of black beans and rice, because the dollar is going to hell if I win that bet.

      • Liam_McGonagle

        I hear you. I just keep tappin’ away, thinkin’ that the resevoirs of good will in society must be deeper than we can imagine. It’s not as if there’s a dearth of well-reasoned altruism on these fora. And shit, even Tea Baggers’ mommies must love ‘em. Gotta be a way of bringing that out.

  • Anonymous

    This slow bleed could last maybe for decades, for reasons discussed at more length at http://disinfo.com/2010/09/how-bp-could-trigger-another-economic-meltdown/

    But that could just turn out to be a blessing in disguise. It could give society an opportunity to manage a “controlled” collapse. I suppose that all depends on the likelihood of competing scenarios:

    1. Economic stagnation gives folks more time to adequately engage in public policy analysis. They accept that just like Soviet-style Communism, Laissez Faire Capitalism just done offed itself, and they will not be placated by the half-masticated leftovers of the uber-rich. And out of some hidden reserve of human decency, if not fear of a nasty social revolution, the uber-wealthy make the necessary concessions and ultimately come to realize that they, too, prefer a society with less glaring inequalities in standard of living.

    2. Too late. The public’s collective brains have been irredeemably scrambled by perverse fantasies that each of us individually is a entity completely viable on its own terms with little or no need to cooperate with one another. Education comes to be seen only as inquiry into best practices for plundering others, and the sciences accordingly are not able to sustain the robust levels of innovation needed to counteract the steady decline in natural resources.The already incredibly sick dynamic of the Patronage Society really begins to kick into gear and the American experiment degenerates into fascistic dictatorship or outright medieval warlordism.

  • emperorreagan

    I’d put $100 on #2.

    Wait.

    20 lbs each of black beans and rice, because the dollar is going to hell if I win that bet.

  • Anonymous

    I hear you. I just keep tappin’ away, thinkin’ that the resevoirs of good will in society must be deeper than we can imagine. It’s not as if there’s a dearth of well-reasoned altruism on these fora. And shit, even Tea Baggers’ mommies must love ‘em. Gotta be a way of bringing that out.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Not having had any Kool Aid, and having kept tabs on bank failures for years (since the burning the S&L crisis gave us is still etched in my memories)…I remain unsurprised. Are we hemorrhaging the way we were in 2007 to 2008…not quite…but the Dems can’t spin me into believing that, with America at the bottom of the cliff…arms and legs broken and bleeding…that the good news is that we aren’t dead yet. Good news would be a genuine recovery…not a slowing of blood loss.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Not having had any Kool Aid, and having kept tabs on bank failures for years (since the burning the S&L crisis gave us is still etched in my memories)…I remain unsurprised. Are we hemorrhaging the way we were in 2007 to 2008…not quite…but the Dems can’t spin me into believing that, with America at the bottom of the cliff…arms and legs broken and bleeding…that the good news is that we aren’t dead yet. Good news would be a genuine recovery…not a slowing of blood loss.