Nice variation on a theme, from Ron Griess of the Chart Store:

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click for larger graphic

Category: Credit, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “FDIC Problem Institutions”

  1. Julia Chestnut says:

    But this makes it look like the problem is a lot less severe than the early 1990s, when the opposite is true. There has been wave after wave of bank consolidation over the intervening couple of decades so that the size of banks now dwarfs what they were then. The nature of the portfolio and its leverage likewise means that the size of losses per bank is going to be much higher as a percentage of the portfolio of the bank. What is interesting is, to my mind, this chart bridges the first derivatives crisis to the second one. I don’t know why they haven’t figured out that derivatives (while they can be used as a hedge for legitimate transactions) are not used in a productive way by most entities. Come to think of it, I seem to remember that (all of a sudden) the smartest guys in the world started saying that no one really knew what these derivatives products were and how they worked back in the 1990s.

    Seems to be everybody gets real stupid when the alternative is to admit to fraud.

    We’ve had two serious crashes now where thieves used derivatives to load up leverage where they had no business doing so. How many more will it take before we get the point?

  2. James says:

    The chart should have stayed with the year end data (12/31) throughout with the exception of the 2010 data for a clearer sense of year over year change. So,

    2006 – 50
    2007 – 76
    2008 – 252
    2009 – 702
    2010 – 752 (thru Q1)

    is all that would have been presented for the last five years, making more apparent the sharp escalation.

    2009
    702

  3. Raised Hand says:

    Actually, Julia Chestnut, the assets under the “Problem Institutions” are much much less than in the early 1990s. Probably because of the very consolidation you claim would have the opposite effect. Barry would never post such a chart, though.

    You can see the data from the FDIC here: http://www.fdic.gov/bank/statistical/stats/2010mar/fdic.html

    Assets in Problem Institutions (in $billion):
    2010 Q1 – 431
    2009 – 403
    2008 – 159

    1993 – 348
    1992 – 601
    1991 – 837
    1990 – 647

    Now, the point where consolidation becomes a problem is also evident in the FDIC table linked. The number of Failed Insitutions is much much lower in 2008-2010 (206) than in 1990-1993 (878). Yet the number of assets in failed institutions is almost as high, 90% of the early 1990s value in inflation-adjusted dollars ($564b now vs $390b then).

    And of course “Assisted Institutions” — the too-big-to-fail institutions that benefited from consolidation — took trillions of dollars now versus almost nothing then.

  4. R. Cain says:

    spin:

    Problem Institutions down 50% vs 1990

  5. Sneak peak for da BEARS on article being done!

    ABANDON HOPE ALL YE WHO ENTER THIS PORTAL’ -Dante, Divine Comedy

    Climatic Bear bottoms are fraught with turmoil, hopelessness and, in the case of long grinding conclusions, abandon. 1981 was just so. THIS animal has a different ‘feel’, so sharp, swift, it will turn your head around! Take cover!

    In a May 18th article, Richard Russell, keeper of Dow Theory clearly delineates conditions for a return to Primary Trend. “The DJIA and DJTA have to violate their May 6th lows.” While the Dow Industrials remained 49 points above the interim intraday lows on May 6th this past Friday; both indices closed below their May 6th close, May 21st and May 22nd, respectively . Thus providing a Dow Theory Sell Signal. (see charts)

    With the May Market Meltdown now fully three weeks old; the Dow down 11% (intraday); and the “Meat-axe approach” of Dow Theory, (as one of my textbooks describes it) confirming the downtrend; some contemplation of amplitude and duration is prudent; especially considering the velocity and sheer declination of the move so far.

    Thanks to the good folks at Stock Trader’s Almanac Investor, for the historical stats: ‘over the last one hundred years, on average, Bear Markets have wiped out 36% of market value’. With that fact in mind and extreme long-term trend lines taken into consideration. A DJIA target of 7200 does not seem out of context given the bleak fundamental outlook in many parts of the globe.

    And, thanks to the late Sir John Templeton for the following observation: “Bull Markets usually double Bear Market bottoms.” Corporate balance sheets are in relatively sound order. Major corporations, ex. financials, have spent the last decade building cash hordes.

    They could quickly rebound once the “E” returns to the Price/Earnings equation. Technology could once again lead, if we are to have the expected rally as part of the Presidential Cycle.

    Now, as to whether this will be a short bear or a long drawn-out affair; the odds favor short and sharp, as monetary panic escalates beyond the ability of international officials to comprehend -stymieing them into inaction. The soaring U.S. Dollar -the last bastion of safety -will will be aggressively “talked down” by Administration officials. They will have no choice, hanging as it does like an Albatross on the neck of the domestic economy and, ANY politician’s chances for re-election, 2012. At that point stocks will soar.

    James Dines talked six months ago about the possibility of going directly from deflation to hyper-inflation. At that point it sounded ludicrous. Now, it may be our only hope.

    Gentle Ben, are you listening.

  6. ir192217 says:

    In the past 20 years the American banking industry has been consolidating. In 1990 there were some 12,000 banks in the country. And by 2009 there were 7,000 banks left.

    The following (rough) calculations tell me that the problem, if measured by the number of distressed banks, is about the same in size:
    1,496 / 12,000 x 100 = about 10%
    775 / 7,000 x 100 = about 10%

    I would like to point out, however, that the number of distressed banks has been growing and this may not be the peak quarter. Potentially the problem may be somewhat worse than the one the country had in 1990.

    (Source of the data: http://seekingalpha.com/article/146153-small-and-mid-sized-u-s-banks-have-large-share-of-cre-loans-in-their-portfolios)

  7. philipat says:

    As a related issue and whilst recognising the TBTF problem, does the US really need over 7000 Banks?

  8. kaleberg says:

    No, the U.S. doesn’t need 7,000 banks. The Federal Reserve should open a retail window, and get the rest of those proven idiots out of a business that is way too complicated for them.

    James: thanks for fixing the time scale. I thought something looked funny there. Another useful adjustment someone should make would be to show the percentage of all banks in trouble rather than the number. We have a lot fewer banks now than in 1990.