Monday, January 05, 2009

99.65% of Commercial Banks Survived 2008

According to FDIC data, 25 commercial banks failed in 2008, out of 7,146 banks in the U.S. The failed banks represent about 1/3 of 1% of all banks, meaning that 99.65% of banks survived the 2008 recession. The chart above displays annual bank failures back to 1970 (data here), showing the S&L crisis (shaded) when almost 3,000 U.S. banks failed.

Before we make comparisons to the Great Depression, we might want to first compare today's financial troubles to the S&L crisis of the 1980s and 1990s, when almost 3,000 banks failed.


At 1/05/2009 1:04 AM, Anonymous Anonymous said...

I’ve seen similar statistics before. However, what is the dollar value of the failures during the S&L crisis versus the current one? This dollar amount should also be normalized as a percent of national financial assets.

At 1/05/2009 4:50 AM, Blogger stilettoheels said...

Here's the nominal dollar value of failures through Q3.08 from the FDIC. There wasn't a large failure in Q4 so the dollar value is slightly higher at 2008 year end. Call it $400 billion.

Let's compare it to 1989 when the nominal dollar value of failures was $164 billion.

From the Federal Reserve data here, bank credit was $2612 billion in 1989 and estimated $9900 billion in 2008.

Losses were 6.3% in 1989 and 4% in 2008 as a percentage of outstanding bank credit.

At 1/05/2009 9:45 AM, Anonymous Anonymous said...

When the government wont allow banks to fail it renders this graph meaningless.

At 1/05/2009 10:16 AM, Anonymous Anonymous said...

Another thing to consider here is that the banking industry is much more consolidated than in 1929 or 1987. Therefore, while there are 3000 banks now, there were probably 30,000 (i made that number up) in 1929, meaning that a larger bank failing could have the same impact as many smaller banks.

At 1/05/2009 12:17 PM, Anonymous Anonymous said...

Also this year's failures by dollar amount is almost entirely due to Washington Mutual, which was only a quazi failure. JP Morgan completely bought them out at no loss to the FDIC. They just waited until the FDIC failed them so they could get a better price. In the absence of the FDIC, it is likely that JP MOrgan would have bought them before they failed. Depending on what you are trying to show with this statistic, this caveat changes the picture by quite a lot.

Now I'm not sure if MP included these thrifts in his chart. I had though the 25 failure number included thrifts, not just commerical banks, which would include WaMu.

At 1/05/2009 6:28 PM, Blogger misterjosh said...

28% of banks failed in 1933.
There were, in fact 25,568 banks in 1929. 10,797 of which would fail by the end of 1933
659 banks failed in 1929 for 2.5%. Far less than last year's .35%


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