Aug. 23 (Bloomberg) -- Columbian Bank and Trust Co. of Topeka, Kansas, was closed by U.S. regulators, the nation's ninth bank to collapse this year amid bad real-estate loans and writedowns stemming from a drop in home prices.
The pace of bank closings is accelerating as financial firms have reported more than $500 billion in writedowns and credit losses since 2007. The FDIC's ``problem'' bank list grew by 18 percent in the first quarter from the fourth, to 90 banks with combined assets of $26.3 billion.
Gene Inger:
"the majority would be surprised by the number of bankruptcies and foreclosures, not to mention commercial failures or insolvencies as still lie ahead."
In part:
Yours truly aggrees very much with Warren Buffet's remark that the 'Fed really hasn't a magic wand'. Actually the authority ascribed to the Fed & Treasury go well beyond all mandates of the past, so in that regard we are in 'unchartered territory'. That's part of why the overall financial risk to the United States is humongous if this doesn't work (though we remain hopeful that these are the building blocks of eventual stabilization; ingerletter.com members know our views about how ill-prepared many systems, even the FDIC itself, remain, depending upon the scope of some concerns we've outlined).
Broad-based jobs growth . . . and financial consolidation seems to be the day's key focus among analysts; and surprise, we don't disagree. However, those bandying the subjects are focused-on later this year and early next; and that we see as premature. At this point, I suspect the majority would be surprised by the number of bankruptcies and foreclosures, not to mention commercial failures or insolvencies as still lie ahead. (And don't forget our housing forecast from 3 years ago: give the bubble back, plus.)
The economic slowdown is not complete...
That the market is even remotely spooked by stories about Fannie Mae at this point; or of the downgrade of expected lowered earnings reports for bankers and brokers, is testimony to the overzealous optimism, and lack of transparency we've alluded to by a slew of firms on 'the Street'. Essentially what we said last year was that they'd just watch and take it quarter-by-quarter, which often is logical; but in this instance totally overly-optimistic, since this was a forecast debt deleveraging 'epic' debacle that takes time.
Hence, it sort of says volumes not only about tendencies to disbelieve the deleverage impacts as are ongoing, but continues to suggest citizens are still groveling for signs of bottoms in housing; which implies markets haven't sufficiently either washed-out or sobered some investors adequately. The reality remains what we've said for months; housing is unlikely to find any general bottom...
...I said then and still believe that the forecast housing burst would proceed well into '09.)
It thus leaves the market open for downside continuity; and even a precipitated 'drop' of greater magnitude than we've experienced during what I labeled a sort of 'Chinese Water Torture' decline...
We welcome meaningful efforts to restore our primacy or regain financial sovereignty.
Edited by Rogerdodger, 24 August 2008 - 10:13 PM.
