Sunday, July 27, 2008

"Problem" Banks? No problem!

The FDIC has a list of "problem" banks, at at the end of last quarter, (March 30) 90 banks were on this list with $26.3 billion of assets, or about $342 million in average assets each.

The previous quarter, there was 76 banks on the list, with $22.2 billion of assts or $292 million in average assets each.

A bit more than $3.6 billion of assets went out the door with First National and First Heritage. If you lumped those off the 90, you have 88 banks with $22.7 billion of assets or about $257 million in assets each.

It just tells you the FDIC is woefully understaffed, and doesn't understand when a problem is a problem.

And it just tells you that the larger banks, with larger deposits, are more adept at concealing problems, because they have more to lose.

The FDIC didn't have IndyMac on their list of problem banks, and anyone with a pulse could tell you it was a problem. IndyMac had over $20 billion in assets-who would want that on the list? It would skew their statistics!

Instead the community banks are the problem because they have retail deposits, of which banks have to pay a higher deposit. Translation: They don't get the spread. Their net interest margin is lower.

So all this talk of higher short term rates is just ridiculous. It would affect the biggest banks first, because their rates, unlike the community banks with a retail deposit base, get affected immediately.

Merrill Lynch has already written off more than double the entire assets of all the FDIC's problem loans. So how can we then have such a credit crunch if the problem resides in just $22 billion of bank's assets?

Because we know there is problem in bigger banks. Because the FDIC says there is no problem.

So that's where the problem reigns!

1 comment:

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