Are We Creating a Bigger Banking Problem?
There was a great deal of jaw flapping about “Too Big To Fail” banks and why we allowed so many to reach the size and complexity of being in that category of “Too big to fail”.
Like most things in our world now, most people have their heads in the sand about our current financial crisis. I think many people believe that it really is over even though unemployment is still hovering around 10% nationwide and is even higher in some cities like Detroit, MI.
I’m concerned about this mindset but not surprised. I guess most people feel like there is nothing they can do about it so why worry. Others are just clueless that it is even still an issue.
The bottom line is, the banks are still under extraordinary pressure to tighten up there books and get their balance sheets in order. I don’t have all of the answers, but I do know that some are forcing, (maybe “Persuading” is a better word) many of their best customers, large performing commercial property owners, to refinance their loans with another institution.
Why in the world would a bank want to do this?
They need performing loans right? I mean, that IS their job right?
Find worthy borrowers and projects that they can lend their investors’ money to.
Yes, that is their primary objective in normal times. These are not normal times though. In order for a bank to stay off the radar of the federal and state regulators, they need to have a large amount of cash reserves on their balance sheet. That amount increases when they have troubled loans. They have to sock more money away when people stop paying on their loans.
That my friend is why the banks call commercial performing notes due. This allows the bank to raise the maximum amount of capital for one of their assets.
If you thought we were out of the “Banking Crisis”, check this out.
We have now reached 125 total closed banking institutions for 2010.
Apparently, these institutions were all NOT “Too Big To Fail”.
According to the FDIC website.
Maritime Savings Bank of Wisconsin had approximately $350 MM in assets.
Bramble Savings Bank of Milford, OH (Suburb of Cincinnati) had approximately $47 MM in assets.
In Georgia, three institutions were shut down and all three ended up going to the same acquiring institution.
Bank of Elijay, Elijay, Ga – $168.8 MM, in assets
First Commerce Community Bank, $248.8 MM in assets
The Peoples Bank, $447.2 MM in assets
The other bank that closed Friday was in New Jersey.
ISN Bank, Cherry Hill, NJ -$81.6 MM in assets
My question to you, are we just creating a larger number of midsize banks that may become “Too Big To Fail” themselves?
Or, are we in the middle of “Right Sizing’ the banking industry?
What should be done about the really big banks that were classified as “Too Big To Fail”?
Leave your thoughts below.
(If no comments section is below, click the title of the post up above and you will see the comments section).
How many more failed banks will we see this year?
