Thursday, August 27, 2009

81 Bank Failures So Far in 2009: It's All Relative

So far this year, there have been 81 bank failures out of 8,195 FDIC-insured institutions, or slightly fewer than 1% of all banks. How does that compare to previous periods of financial stress and episodes of bank failures?

This first graph below shows annual bank failures (data here) from 1930 to 2009, showing the two most serious banking crises, the Great Depression (9,146 bank failures) and the S&L Crisis (2,935 bank failures).


This chart shows bank failures from 1935 to 2009, and puts the 81 bank failures this year in perspective in comparison to the S&L crisis and the second half of the Great Depression.

This chart below shows bank failures since 1970, and puts some further perspective on the 81 bank failures this year, compared to the S&L crisis.

Caveat: This analysis simply shows the number of bank failures per year, and could obviously be supplemented with data on the number and size of bank failures.

Originally posted at Carpe Diem.


22 Comments:

At 8/27/2009 7:45 PM, Anonymous Anonymous said...

Hello...could you fix the data link to the historical information? Thanks.

 
At 8/27/2009 7:48 PM, Anonymous Anonymous said...

Yes, it could and should obviously be augmented by bank size which is, on average, much larger than it was in the S&L crisis. Then there are the other 400 plus banks on the problem bank list and rising delinquency rates which will increase that number further.

 
At 8/27/2009 8:04 PM, Blogger Mark J. Perry said...

Links are now fixed, sorry.

 
At 8/27/2009 9:05 PM, Blogger QT said...

Anon.,

You have raised an excellent point. Could you please provide some information regarding the bank size.

I think our beleaguered blog host could do with a break.

Thanks for your help.

 
At 8/27/2009 11:58 PM, Anonymous Benny The Free Marketeer said...

It often seems Americans cannot fathom relative risks. For example. 3,000 died on 9/11, but 30,000 that same year in auto accidents...and every year since.
We overrate terrorism manifold times. Bush did that too.
A few banks fail, but so what.

 
At 8/28/2009 12:40 AM, Anonymous Anonymous said...

Www.fdic.gov

I don't do people's homework for them.

"Analysis" Really?

Beleaguered? I wish I had a job which would pay me to write several blog posts a day.

 
At 8/28/2009 1:01 AM, Anonymous Anonymous said...

Hint: "The average cost to the fund of a bank failure over the past 19 months has run higher than the savings and loan debacle. That's partly due to smaller banks having higher resolution costs than larger ones and because the steep decline in home prices that set off the current distress wasn't a factor in the earlier crisis. Because of the tumble in prices, the loss rates on home loans and construction and development loans were higher for banks with a domino effect on related secuties....rapid growth, brokered deposits and heavy lending in hot markets."

The current losses to the DIF are already larger than the S&L crisis despite the number of failures and there's still more to come. Put that into perspective.

 
At 8/28/2009 4:45 AM, Blogger 1 said...

Well benny the pseudo marketeer still can't get a clue...

"For example. 3,000 died on 9/11, but 30,000 that same year in auto accidents"...

Yeah but did all 30K auto fatalities happen in just two or three places?

"We overrate terrorism manifold times. Bush did that too"...

I would imagine that if these people could they would violently disagree with your statement...

"A few banks fail, but so what"...

Define a few...

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

 
At 8/28/2009 8:14 AM, Anonymous Anonymous said...

Just to put it in quick perspective, let's just think of a few financial entities that had to be "rescued" after failure... Wachovia, Washington Mutual, Bear Stearns (shadow banking system) and Merril Lynch (shadown banking system). The assets of these companies, in aggregate, FAR exceed anything we've ever seen before. However, because these entities were not necessarily closed by FDIC and instead were propped-up with taxpayer dollars, these data will never show up in your analysis and your data will remain EXCESSIVELY conservative.

 
At 8/28/2009 9:27 AM, Anonymous Anonymous said...

Thus far, the failed assets of a smaller number of failed banks in 2008 and 2009 through June are about the same as the failed assets of a larger number of failed banks during the S&L crisis. However, the FDIC has assisted banks to the tune of $1.3 trillion during this episode with no assistance during the S&L crisis.

FDIC Stats at a Glance

 
At 8/28/2009 9:41 AM, Blogger QT said...

"I don't do people's homework for them."

I'm afraid it's your homework. In argumentation if you make a claim, you must also be prepared to back it up with more than hot air.

There are certainly significant assets involved in the present crisis and the idea of looking at assets as opposed to just the total number of banks would appear to offer a useful way of comparing the crises. You may be correct that the present crisis dwarfs GD & S&L, however, you haven't presented any compelling evidence to support this assertion.

Blowing smoke rings just doesn't cut it.

 
At 8/28/2009 9:55 AM, Blogger QT said...

Anon.,

Thank you for the chart from FDIC.

I believe that the numbers presented are actuals rather than being stated in inflation adjusted dollars. Was hoping that the chart would indicate total assets so that one could determine the percentage of failed bank assets.

 
At 8/28/2009 10:21 AM, Anonymous Anonymous said...

No, QT, I do not have to do any homework. The blogger foisted an 'analysis' which amounted to nothing more than a count of failed banks over time and a faint admission that there migh be more to the story. This didn't blunt the intended thesis that 'this aint so bad as it was before.'

If an economist is going to proffer ideas, one would expect something more deep than a drop of oil in a bathtub of water.

A 20000 word thesis can be destroyed by a single counterexample. I don't need to provide any 'homework' to prove a poorly presented thesis wrong. I only need to point out its inadequacy.

I don't buy the excuse of lack of time for presenting views not well thought out. Nor do I accept the excuse that original thesis is intended to be shot full of holes. Nor do I accept the burden of single-handedly having to correct 'analysis' which would earn a Freshman economics major a C.

I will accept a mea culpa as honest ignorance about an extremely complex issue.

 
At 8/28/2009 10:55 AM, Anonymous Anonymous said...

The Cost of the S&L Crisis

The S&L crisis resulted in the closing of 1043 institutions with assets of $519 billion at a cost of $145 billion to the Treasury by 1999, with most of the closures starting in 1990 through the Resolution Trust Corp.

Thus far in this crisis, on an inflation adjusted basis, the failed assets are lower (but the loss per failed asset is higher), but the final tally will not be written for years.

However, it is the assistance (5 of The-Too-Big-To-Fail banks)noted upthread that must be taken into consideration in comparing the episodes. The failure of Citi alone would have made the episodes similar on an inflation adjusted asset basis.

 
At 8/28/2009 3:55 PM, Blogger 1 said...

"I don't need to provide any 'homework' to prove a poorly presented thesis wrong. I only need to point out its inadequacy"...

Well I'm still waiting with baited breath for that alledged inadequacy that you were supposedly goint to point out...

You'll get around to it pretty soon, right?

 
At 8/28/2009 6:48 PM, Blogger QT said...

"I only need to point out its inadequacy"

Fair point. Thank you for what you have provided re: S&L. I agree that these are very complex issues.

 
At 8/29/2009 2:11 AM, Anonymous Anonymous said...

The inadequacy, 1, is comparing the number of bank failures rather than total losses to the insurance fund.

A bank can fail and cost the FDIC nothing but wages if they find a buyer for the failed bank's assets and liabilities. Most FDIC deals have loss sharing arrangements where the FDIC takes a loss only over and above a pre-determined loss.

So the number of bank failures is a wholly inadequate measure of whether this crisis is as bad as the previous one. I don't know why that was necessary to point out since it should be obvious to anyone with baited breath.

 
At 8/29/2009 3:46 AM, Blogger 1 said...

"So the number of bank failures is a wholly inadequate measure of whether this crisis is as bad as the previous one"...

Surely you jest...

Oh my...

 
At 8/29/2009 11:40 AM, Anonymous Anonymous said...

I'm not jesting, and don't call me Shirley.

I've read your writing before, 1. You're not a stupid person.

So why are you having such incredible difficulty wrapping your brain around the simple idea that not all banks are the same size and not all bank failures produce the same losses or even ANY losses to the deposit insurance fund?

This isn't like counting dead bodies from two different natural disasters.

 
At 8/29/2009 2:06 PM, Blogger 1 said...

"So why are you having such incredible difficulty wrapping your brain around the simple idea that not all banks are the same size and not all bank failures produce the same losses or even ANY losses to the deposit insurance fund?"...

Well the fact of the matter is that even though the monetary amounts may be completely different for each bank failure the loss to the customers and to each area is a unique situation with it own set of unique problems...

Ever see a small town lose its only bank?

 
At 8/29/2009 9:51 PM, Anonymous Anonymous said...

1, you have absolutely no idea what you're talking about and are sounding stupider each time you post.

These bank failures are NOT resulting in closing the only branches in small towns. Nearly every one of these banks, if not all of them, had their deposits and assets acquired by other banks who CONTINUE OPERATING. The handoff is seamless to depositors. The FDIC resolutions specifically require the acquiring banks to keep operating branches where the community is reliant on it. Demographic reports are part and parcel of Board decisions. There's a reason the FDIC arrives at banks on Friday evenings. They take control of the bank, operate normal business hours on Saturday, and the acquiring bank takes over on Monday morning, usually with the same tellers. If the FDIC can't find a buyer, it operates the bank until they find one. NO small communities are being left without a bank.

Quit trying to rescue yourself from your own ignorance with more idle talk and actually start reading the FDIC press release for all these failures.

 
At 8/29/2009 9:58 PM, Anonymous Anonymous said...

Oh, one more thing: not ONE CENT of insured deposits have been lost in the 75 year history of the FDIC. NOT ONE CENT.

Even people who had deposits above the insured amount have received most, if not all of it back. For IndyMac, depositors were immediately paid up to 150% of insured deposits and vouchers for the rest if anything was left over after liquidation. In most acquisitions, the buying bank assumes ALL deposits whether insured or not, causing NO LOSS to depositors.

If someone had deposits above the insured limit and they lose money, it's their own damned fault.

 

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