It’s been a while since I’ve had time to do a bank failures
update, but it’s overdue. The FDIC closed seven more banks on Friday, and that
brings the total FDIC bank failures to 106 in 2009. See here for the FDIC's full list of
failed banks since October 1, 2000.
The graph at right (courtesy of Calculated Risk) shows bank failures by week in 2009. (Click on any chart to enlarge). After a busy summer of bank closures, the pace slowed in October. With 10 weeks left, the prediction from Calculated Risk is for about 130 bank failures this year.
In a prior post, Bank Failures in Historical Perspective,
I compared the current pace of bank failures to the pace during the S&L
crisis and the great depression. At the current rate, bank failures in
2009 will outpace the early years of the S&L crisis. From 1982 thorough
1984 there were about 100 failures per year. After that, the number of
failures rapidly increased, as shown in this second graph at left, also from Calculated Risk.
As this third chart below demonstrates more clearly, bank closures were far more
numerous during both the Savings & Loan Crisis and during the 1920s and
early 1930s, before the FDIC was created in 1933. For example, the number
of bank failures is estimated at 4000 for the year 1933, and 500 bank failures
per year was commonly seen during the 1920’s. As I’ve noted in prior
posts, the number of bank failures alone does not tell the whole story of
distress from bank failures, which is a function of the total number of
existing banks, the size of their assets and liabilities, the number of
branches, and other factors. Nor do bank closures paint the whole picture of
economic crisis – in the current financial crisis, many of the most spectacular
failures or bailouts have been of non-bank financial institutions.
To get at some of these questions, Calculated Risk has a List of Failed Banks since 2007, which includes assets and estimated losses. Finally, for those wanting a peek into the future, see this unofficial List of Problem Banks.
Also this week, we have a message from FDIC Chair Sheila Bair:
Rolfe Winkler (see chart at
right) thinks it’s misleading to compare the number of bank failures during
this cycle to the number in past cycles, because as a % of GDP, the amount of
deposits in failed banks is far higher now. (But he counts Citi, BofA, and
Wachovia as failed banks in order to get this figure, on the rationale that
they could not have withstood last year’s crisis were it not for bailouts.)
Prior related posts:
Supersize Me: Too Big To Fail, and Getting Bigger
Bank Failures in Historical Perspective
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