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1000 Banks To Fail In The Us In The Next 2 Years

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http://www.cnbc.com/id/32581463

1,000 Banks to Fail In Next Two Years: Bank CEO

Published: Thursday, 27 Aug 2009 | 11:44 AM ET

By: Natalie Erlich

The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.

“We’ve already lost 81 this year,†he told CNBC. “The numbers are climbing every day. Many of these institutions nobody’s ever heard of. They're smaller companies.â€

Failed banks tend to be smaller and private, which exacerbates the problem for small business borrowers, said Kanas, who became CEO of BankUnited when his firm bought the bank and is the former chairman and CEO of North Fork bank.

(See the accompanying video for the complete interview.)

“Government money has propped up the very large institutions as a result of the stimulus package,†he said. “There’s really very little lifeline available for the small institutions that are suffering.â€

This comes at a time when the FDIC has established new rules on bank sales. Private equity, for instance, would have to hold double the capital of their competitors in order to buy such an institution, said Kanas.

“This will have somewhat of a chilling effect on our participation,†he said. “As a result of having to keep higher capital levels, we’ll see lower prices coming from that sector.â€

Of the 81 failed banks this year, two have been successfully acquired by private equity, he said. Kanas’ private equity firm bought UnitedBank, the failed Florida-based bank, from the FDIC in May. Regulators also allowed the sale of IndyMac Bank of California earlier this year.

“We are seeing more people step up and lobby bids in this situation,†he said. “We’re seeing more players mostly as a result of being attracted to the sector. I’m not so sure that will continue now that the rules have been ratchet it up.â€

Meanwhile, much of the commercial realty problem resides in the regional and small community banks, said Kanas, because larger banks haven’t fueled that sector in the past.

“The market is expecting about the way we were expecting,†he said. “Unfortunately, we’re not seeing any evidence of a recovery in the real estate market in the southern Florida market,†he said.

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Told ya. It's S&L all over again. And we know what that lead to...

http://www.cnbc.com/id/32576575

FDIC's Fund Plunges 20% As Banking Industry Posts Loss

Published: Thursday, 27 Aug 2009 | 10:33 AM E

By: AP

With bank failures rising, the government's deposit insurance fund fell 20 percent to $10.4 billion in the second quarter as U.S. banks lost $3.7 billion.

The Federal Deposit Insurance Corp. said Thursday that surging levels of soured loans at banks dragged down profits in the April-June period. The $3.7 billion loss compared with profits of $7.6 billion in the first quarter, and $4.7 billion a year ago.

The FDIC also said the number of banks deemed to be in trouble jumped to 416 from 305 at the end of the first quarter. That's the highest number since June 1994 during the savings and loan crisis.

Total assets of troubled institutions surged to $299.8 billion from $220 billion in the first quarter.

Eighty-one banks have failed so far this year, and hundreds more are expected to fall in coming years because of souring loans for commercial real estate. That threatens to deplete the FDIC's fund, which guarantees deposits of up to $250,000 per account.

The new level of the insurance fund puts the ratio at 0.22 percent, compared with the congressionally mandated minimum of 1.15 percent.

The FDIC said nearly 66 percent of banks and savings and loans reported earnings below those in the second quarter of 2008, and more than a quarter posted a net loss.

"While challenges remain, evidence is building that the U.S. economy is starting to grow again," FDIC Chairman Sheila Bair said in a statement. "The banking industry, too, can look forward to better times ahead. But for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry's bottom line."

The 8,195 federally insured banks and thrifts set aside $66.9 billion in the second quarter to cover potential loan losses, up from $60.9 billion a year earlier.

The FDIC's insurance fund has been so depleted by the epidemic of collapsing financial institutions that analysts warn it could sink into the red by the end of this year.

That has happened only once before—during the savings-and-loan crisis of the early 1990s, when the FDIC was forced to borrow $15 billion from the Treasury and repay it later with interest.

Small and midsize banks nationwide have been hurt by rising loan defaults in the recession. When they fail, the FDIC is responsible for making sure depositors don't lose a cent.

It has two options to replenish its insurance fund in the short run: It can charge banks higher fees or it can take the more radical step of borrowing from the U.S. Treasury.

None of this means bank customers have anything to worry about. The FDIC is fully backed by the government, which means depositors' accounts are guaranteed up to $250,000 per account. And it still has billions in loss reserves apart from the insurance fund.

Because of the surging bank failures, the FDIC's board voted Wednesday to make it easier for private investors to buy failed financial institutions.

Private equity funds have been criticized for taking too many risks and paying managers too much. But these days fewer healthy banks are willing to buy ailing banks, and the depth of the banking crisis appears to have softened the FDIC's resistance to private buyers.

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Does he mean 1000 bank branches or 1000 actual banks?

If it's the latter, then we are talking tens of thoudsands of branch closures. The Great Depression had around 3000 total branch closures IIRC (because most banks only had one branch in those days I think).

Edited by MOP

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Does this mean that as well as a jobless recovery where going to have a bankless recovery as well?

It's a ******ing recoveryless recovery! :angry:

I'm getting tired of the media ********.

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It's a ******ing recoveryless recovery! :angry:

I'm getting tired of the media ********.

We do appear to be taking doublethink to whole new levels at the minute.

The media are going for very simple brainwashing.

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We do appear to be taking doublethink to whole new levels at the minute.

The media are going for very simple brainwashing.

A lot of people think the same though: If you look at comments at the end of the PR crap in the media where ordinary people are ABLE to comment - you see that, actually, generally speaking, people don't buy the sh1t being peddled by the VI's..... And then you get the odd comment from EA's/BTL people - which smack of desperation! :P

e.g. here - http://www.dailymail.co.uk/news/article-12...s-expected.html

Read the comments at the end :D

Edited by eric pebble

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