by Calculated Risk on 2/15/2009 07:01:00 PM

Four banks were closed by the FDIC Friday, for a total of 13 banks so far in 2009. To put those failures into perspective, here are two graphs: the first shows the number of bank failures by year since the FDIC was founded, and the second graph shows the size of the assets and deposits (in current dollars).

Click on graph for larger image in new window.

Back in the '80s, there was some minor multiple counting ... as an example, when First City of Texas failed on Oct 30, 1992 there were 18 different banks closed by the FDIC. This multiple counting was minor, and there were far more bank failures in the late '80s and early '90s than this year.

Note: there are currently 8,384 FDIC insured banks.

The second graph (ht Kurt) shows the bank failures by total assets and deposits per year starting in 1934 (in current dollars adjusted with CPI).

WaMu accounted for a vast majority of the assets and deposits of failed banks in 2008, and it is important to remember that WaMu was closed by the FDIC, and sold to JPMorgan Chase Bank, at no cost to the Deposit Insurance Fund (DIF).

There are many more bank failures to come over the next couple of years, mostly because of losses related to Construction & Development (C&D) and Commercial Real Estate (CRE) loans, but so far, especially excluding WaMu, the total assets and deposits of failed FDIC insured banks is much smaller than in the '80s and early '90s.

by Calculated Risk on 2/15/2009 03:04:00 PM

From the WSJ: Axelrod: Obama Has 'Solid' Housing Plan

Speaking on "Fox News Sunday," senior adviser David Axelrod said the plan that President Barack Obama plans to announce on Wednesday will aim to provide immediate help to homeowners who are "right on the edge" of foreclosure, and ultimately help in "raising home values that have been plummeting."

Mr. Obama plans to unveil his housing plan during a visit to Phoenix. As part of his swing through western states, he is set to top in Denver Tuesday, when he will sign the $787 billion economic-stimulus plan just passed by Congress.

Mr. Axelrod provided few details of the housing plan, but said a government investment of $50 billion to $100 billion to fund foreclosure prevention "is obviously a necessary part." He promised that the plan would contain "a lot of aspects."

I hope "a lot of aspects" includes "a lot of details".

by Calculated Risk on 2/15/2009 10:55:00 AM

From the Times: £30 billion loss at RBS prompts savage job cuts (ht Jan)

ROYAL BANK OF SCOTLAND boss Stephen Hester is to unveil a brutal cost-cutting exercise, alongside record losses of close to £30 billion, that are expected to lead to a further 10,000 to 20,000 job cuts.
...
The bank has already axed 13,000 jobs internationally since last April, including 3,000 in its investment-banking business.

And the beat goes on ...

by Calculated Risk on 2/14/2009 08:01:00 PM

To new readers, please see In Memoriam: Doris "Tanta" Dungey

From Tanta's sister Cathy on some new items:

They say “Tanta Vive” on the embroidery instead of the mortgage pig. Some of us who “sport the pig” already get looks from people and I’m sure this will just add to that but we encourage the questions. To find them in EBay you search on “ Tanta ” and you’ll see them all. I’m switching all future donations to the OCRF. [Ovarian Cancer Research Fund (www.ocrf.org)]

Here is the link for Mortgage Pig Gear - the Tanta Vive items are the bottom.

These items are produced as they are ordered and we do apologize about the size and color confusion. The best method is to enter this information in the PayPal message box when completing the order.

We will accept check orders outside of Ebay but that will slow things down. Please EMAIL: rwstick AT yahoo DOT com (Dick) with the item, size and color and we will return the cost with shipping. Once the check is received with shipping instructions we will process the order.

Note from CR: I have a few items - my favorite is the Hooded Sweatshirt! Thanks for everyone who bought gear - and helped with this great cause - and thanks to those who donated to the Doris "Tanta" Dungey Endowed Scholarship Fund too.

And now, from Tanta last year: Happy Valentines Day

From Mortgage Pig™. (click on Pig for larger image)

by Calculated Risk on 2/14/2009 04:22:00 PM

Bill Moyers interviews Simon Johnson (ht Nemo)

Former chief economist of the International Monetary Fund (IMF), MIT Sloan School of Management professor and senior fellow at the Peterson Institute for International Economics, Simon Johnson examines President Obama's plan for economic recovery.

And Joe Nocera writes in the NY Times: A Stress Test for the Latest Bailout Plan (ht MrM)

Matthew Richardson and Nouriel Roubini write the WaPo: Nationalize the Banks! We're all Swedes Now

First -- and this is by far the toughest step -- determine which banks are insolvent. Geithner's stress test would be helpful here. The government should start with the big banks that have outside debt, and it should determine which are solvent and which aren't in one fell swoop, to avoid panic. Otherwise, bringing down one big bank will start an immediate run on the equity and long-term debt of the others. It will be a rough ride, but the regulators must stay strong.

Second, immediately nationalize insolvent institutions. The equity holders will be wiped out, and long-term debt holders will have claims only after the depositors and other short-term creditors are paid off.

Third, once an institution is taken over, separate its assets into good ones and bad ones. The bad assets would be valued at current (albeit depressed) values. Again, as in Geithner's plan, private capital could purchase a fraction of those bad assets. As for the good assets, they would go private again, either through an IPO or a sale to a strategic buyer.

The proceeds from both these bad and good assets would first go to depositors and then to debt-holders, with some possible sharing with the government to cover administrative costs. If the depositors are paid off in full, then the government actually breaks even.

Fourth, merge all the remaining bad assets into one enterprise. The assets could be held to maturity or eventually sold off with the gains and risks accruing to the taxpayers.

The eventual outcome would be a healthy financial system with many new banks capitalized by good assets. Insolvent, too-big-to-fail banks would be broken up into smaller pieces less likely to threaten the whole financial system. Regulatory reforms would also be instituted to reduce the chances of costly future crises.

And they conclude: We're all Swedes now!

by Calculated Risk on 2/14/2009 01:52:00 PM

“I’m really scared of what could happen, because I bought property here. If I can’t pay it off, I was told I could end up in debtors’ prison.”
Sofia, a 34-year-old expatriate.

Last week I posted a story on "skips" in Dubai - expatriates fleeing home rather than risk jail for defaulting on loans. Below is another story on Dubai from the NY Times.

First, here is a video on the Dubai real estate crash (hat tip James):



From the NY Times: Laid-Off Foreigners Flee as Dubai Spirals Down

With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills).
...
No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy.

Instead of moving toward greater transparency, the emirates seem to be moving in the other direction. A new draft media law would make it a crime to damage the country’s reputation or economy, punishable by fines of up to 1 million dirhams (about $272,000). Some say it is already having a chilling effect on reporting about the crisis.
...
[M]any expatriates here talk about Dubai as though it were a con game all along. Lurid rumors spread quickly: the Palm Jumeira, an artificial island that is one of this city’s trademark developments, is said to be sinking, and when you turn the faucets in the hotels built atop it, only cockroaches come out.

It could be worse, at least the U.S. allows reporters (and bloggers!) to report on the crisis. And imagine a debtors' prison ... it would be filling up pretty quickly now. Maybe building all those prisons would add a little stimulus to the economy (just kidding of course).

by Calculated Risk on 2/14/2009 01:00:00 PM

From Eric Dash at the NY Times: Disposing of Assets of Failed Banks Tests F.D.I.C.

... The F.D.I.C. faces tough choices ... every day as it struggles to manage $15 billion worth of loans and property left from failed banks. If still-to-be-sold assets from IndyMac Bancorp of California, whose demise last year was the fourth-largest bank failure, are included, the number jumps to $40 billion.

The F.D.I.C. inherited the collection of loans and property after the failure of 25 banks in 2008, compared to just three in 2007. Thirteen more have failed this year, including four on Friday night, and no one doubts that more are on the way. The F.D.I.C., which insures bank deposits and ultimately has responsibility for liquidating failed banks, is selling hundreds of millions of dollars worth of loans through eBay-like auction sites.

DebtX of Boston and First Financial Network of Oklahoma City, for instance, sell loans at auction to investors who typically pay 5 cents to 85 cents for each dollar of outstanding principal, according to Bliss A, Morris, First Financial’s president. It is unloading hundreds of houses across the country at bargain basement prices. In November, Lula Smith, 86, of Kansas City, Mo., bought a two-bedroom house across the street from her home for $4,000, one-tenth of its value two years ago.

There is much more in the article ... and many more failures coming.

by Calculated Risk on 2/14/2009 11:48:00 AM

From the WSJ: GM to Offer Two Choices: Bankruptcy or More Aid

General Motors Corp., nearing a federally imposed deadline to present a restructuring plan, will offer the government two costly alternatives: commit billions more in bailout money to fund the company's operations, or provide financial backing as part of a bankruptcy filing...

GM will argue it needs the additional government funds to stay out of bankruptcy court, people familiar with the matter said. At the same time, the company -- which previously had dismissed suggestions that it might need to file for bankruptcy -- has moved closer to such a prospect.

It looks unlikely that GM will have a plan ready by Tuesday, and will ask for an extension. No word from Chrysler, but a bankruptcy has to be likely.

by Calculated Risk on 2/13/2009 11:57:00 PM

Office Space Available: 12 Months Free Rent, Warren, MI (Detroit)

Photo credit: MS

Now if they'd just offer a one year lease with 12 months free rent on a beach front house in Hawaii ...

by Calculated Risk on 2/13/2009 08:24:00 PM

From the FDIC: Washington Trust Bank, Spokane, Washington, Acquires All of the Deposits of Pinnacle Bank, Beaverton, Oregon

Pinnacle Bank, Beaverton, Oregon, was closed today by the Oregon Division of Finance and Corporate Securities, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Washington Trust Bank, Spokane, Washington, to assume all of the deposits of Pinnacle Bank.
....
As of December 31, 2008, Pinnacle Bank had total assets of approximately $73 million and total deposits of $64 million. In addition to assuming all of the deposits of the failed bank, including those from brokers, Washington Trust Bank agreed to purchase approximately $72 million in assets at a discount of $7.6 million. The FDIC will retain the remaining assets for later disposition.
...
The FDIC estimates that the cost to the Deposit Insurance Fund will be $12.1 million. Washington Trust Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Pinnacle Bank is the thirteenth FDIC-insured institution to fail in the nation this year, and the first in Oregon since Far West, Federal Savings Bank, Portland, was closed on May 23, 1991.

Four down today.

Haiku from Soylent Green is People:

Failure Quinella....
Thirteen on Thirteen: unique?
Horizon: dark....bleak?