by Calculated Risk on 7/31/2011 03:41:00 PM

The following graph compares the weekly count of banks on the "unofficial problem bank list" with the number from the FDIC's Quarterly Banking Profile.

We started posting the Unofficial Problem Bank list in early August 2009 (credit: surferdude808).

The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public.

CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.


The red dots are the number of banks on the official problem bank list as announced in the FDIC quarterly banking profile for Q1 2009 through Q1 2011. The dots are lagged one month because of the delay in announcing formal actions. Here is a graph from the FDIC back to Q1 2006.

On August 7, 2009, we listed 389 institutions with $276 billion in assets, and the list now has 995 institutions and $415 billion in assets.

For Q1 2011, the FDIC listed 888 institutions and $390 billion in assets (somewhat less than the unofficial list a month later). The FDIC Q2 2011 Quarterly Banking Profile will be released in a few weeks.

The unofficial count is close, but is somewhat higher than the official count.

Yesterday:
• Summary for Week ending July 29th
• Schedule for Week of July 31st

by Calculated Risk on 7/31/2011 12:18:00 PM

The final vote will probably be on Tuesday to maximize camera time ...

From the WSJ:

The White House and negotiators for congressional leaders of both parties are pushing for a deal that would raise the nation’s borrowing limit in tandem with deficit reduction in a two-stage process that could result in as much as $3 trillion in spending cuts over the next decade, lawmakers said Sunday.

The terms of the second phase – which would link further borrowing leeway to a potentially far-reaching overhaul of the tax code, defense spending and the major old-age safety net programs – are still not decided, leaders of both parties said in appearances on Sunday morning news programs.

The details sketchy are still sketchy, so it is difficult to tell how much of a drag this plan will be on the economy.

On a personal note, I think most Americans (and most politicians) do not understand the U.S. budget. This reminds me of the housing bubble - it seemed obvious to many of us, but most Americans (and most politicians) missed it completely. As an example, the "Balanced Budget Amendment" is obviously bad policy, yet politicians aren't ridiculed for supporting it. Immediate cuts with a 9.2% unemployment rate are bad policy, but that appears to be what is going to happen. I wish I was a better writer ... but I'll try to explain why these are policy mistakes in the months ahead.

Update: here is what I wrote in the comments:

I get really frustrated with politicians comparing the Federal budget to a family budget. The government does not have a capital budget, so if they spend money on R&D or roads, that is just included in the budget.

If a family buys a car with 5 year financing, they usually just budget the monthly payments. If they budgeted like the government, they'd have to include the entire purchase of the car the year it was bought (same with a house - they'd have to enough to pay cash to buy the house).

Some people compare to the states too. Hey the states are supposed to have balanced budgets. But states have separate capital and operating budgets. I think people just don't understand.
...
A politician can say "We should have a balanced budget". It sounds good, but why aren't they challenged about operating vs. capital budgets? And about business cycle spending (obviously revenue falls during a recession - and spending increases)?

What they really want is a balanced operating budget over the business cycle. You can't put that in the Constitution. It requires effective government and constant vigilance.

Of course in 2001, when the politicians were concerned about paying off the debt too soon, that nonsense went mostly unchallenged too. Very frustrating.

I need to think about how to explain it. "Balanced budget" sounds so good, and is so wrong.

by Calculated Risk on 7/31/2011 08:15:00 AM

From the National Restaurant Association: Restaurant Industry Outlook Strengthened in June as Restaurant Performance Index Rose Above 100

Driven by stronger same-store sales and traffic levels and a more optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) rose above 100 in June. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.6 in June, up 0.8 percent from May’s level of 99.9. In addition, June represented the sixth time in the last seven months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

“The RPI’s solid improvement in June was due in large part to stronger same-store sales and customer traffic performances, which bounced back from their May declines,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “In addition, restaurant operators are optimistic that their sales environment will improve in the months ahead, while their outlook for capital spending also remains strong.”
...
Restaurant operators reported stronger same-store sales results in June. ... Restaurant operators also reported improving customer traffic levels in June.

Click on graph for larger image in graph gallery.

The index increased to 100.6 in June (above 100 indicates expansion).

Unfortunately the data for this index only goes back to 2002.

This is a minor report (barely "D-List" data), but I'd expect discretionary spending to slow sharply if consumers become really worried - and that doesn't seem to be happening.

by Calculated Risk on 7/31/2011 12:17:00 AM

From the NY Times: Amid New Talks, Some Optimism on Debt Crisis

Senator Harry Reid ... said he would convene the Senate at noon on Sunday for a vote an hour later.

The vote will probably be delayed some more ... and then maybe fail in the House on the first vote. But eventually the debt ceiling will be raised.

Earlier:
• Summary for Week ending July 29th
• Schedule for Week of July 31st

by Calculated Risk on 7/30/2011 09:14:00 PM

• I remain confident that Congress will raise the debt ceiling; however the circus in D.C. is clearly impacting the economy. This morning I spoke to a business owner who is negotiating a new lease to expand. His lawyer told him not to sign the lease until the debt ceiling issue is resolved. I believe similar caution has gripped business owners and consumers in many places - and impacting consumer and business confidence.

• Some people have asked why Q2 GDP growth was higher than Q1 GDP growth given the supply chain disruptions hit in Q2. The answer is both quarters were weak, but there was slightly more investment in Q2, less drag from government spending in Q2, and a positive contribution from trade. Inflation was lower in Q2 too, so the adjustment to real GDP was less.

The supply chain disruptions really showed up in Personal Consumption Expenditures (PCE) in Q2. PCE contributed almost nothing to Q2 growth; PCE increased at a 0.1% annualized real rate in Q2, after increasing at an anemic 2.1% in Q1. PCE should bounce back in Q3 - so real GDP growth will probably pick up. Well, if the politicians stop hurting the already fragile economy.

• I'm trying to ignore the debt ceiling nonsense, but it will probably be front page news for the next few days - so it will be difficult to avoid. Ezra Klein at the WaPo is providing excellent coverage, and the Capital Gains and Games blog has some great insights. (I expect Ezra will be working Sunday).

If you think Congress will fail to raise the debt ceiling, I'd suggest Tar and Feather futures!

Earlier:
• Summary for Week ending July 29th
• Schedule for Week of July 31st