Here is the highlights with pithy comments by me (in red):
INSURED INSTITUTION PERFORMANCE
1) Higher Loss Provisions Lead to a $3.7 Billion Net Loss
"Are you low balling the provisions to remain solvent?"
2) More Than One in Four Institutions Are Unprofitable
"That's 2,048 banks! Yikes...25%"
3) Charge-Offs and Noncurrent Loans Continue to Rise
"Meaning... things are getting worse and you are low balling #1 above."
4) Net Interest Margins Show Modest Improvement
4) Net Interest Margins Show Modest Improvement
"Duh... You borrow at near 0% and lend at much higher rates"
5) Industry Assets Decline by $238 Billion
5) Industry Assets Decline by $238 Billion
"People are taking their money out of the banks"
Now for some scary graphs.
The FDIC can only cover 60% of the failing loans. So they are hoping that 100% don't fail? Which means they are in no position to insure your bank deposits in total if there was a "run on the banks". That's a pretty good indication that the 8,195 insured financial institutions in the United States are approaching insolvency and their primary insurer, the FDIC, is technically bankrupt.
Problem institutions were increasing >20% per quarter for 2 years! If this continues, by 2010 more than half of all insured US financial institutions will be listed as "problem". If this isn't the tipping point for the whole US financial system then simply wait till 2011 when we reach 100% problem institutions.
There is a chart on page 7 "Quarterly Percent Change in Total Loans and Leases" that suggest that Financial Institutions are unwinding the excessive debt. If they do this slowly and methodically, I believe that collapse can be avoided. Unfortunately this means that US economic recovery is years away since credit remains extremely tight. My charts suggest that US housing turnaround will not occur before 2012 and most likely will be confirmed by 2014.
ReplyDeleteThe most important thing is to avoid a panick. Just before Lehman collapse and certainly thereafter, the world was panicky and that was a very dangerous time. I believe that things are really bad right not but the dangers of "mob mentality" are muted.
It is very important that US Citizens be given something to worry about other than their money. Or even better, positive distractions like exciting professional sports seasons, hollywood goings on or a big scientific breakthrough.