Bank on this: bank failures will rise in next year

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AP, via Yahoo!:



AP
Bank on this: bank failures will rise in next year
Sunday October 5, 5:06 pm ET

By Michael Liedtke, AP Business Writer
Financial crisis likely to yield biggest banking shakeout since savings-and-loan meltdown


SAN FRANCISCO (AP) -- Here's a safe bet for uncertain times: A lot of banks won't survive the next year of upheaval despite the U.S. government's $700 billion plan to restore order to the financial industry.

The biggest question is how many will perish and how they will be put out of their misery -- in outright closures by regulators scrambling to preserve the dwindling deposit insurance fund or in fire sales made under government pressure.

Enfeebled by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period. That was during the clean-up phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170 billion to $205 billion, after adjusting for inflation.

The government's commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.

"It will help, but it's not going to be the saving grace" because a lot of banks are holding construction loans and other types of deteriorating assets that the government won't take off their books, predicted Stanford Financial analyst Jaret Seiberg. He expects more than 100 banks nationwide to fail next year.

The darkening clouds already have some depositors pondering a question that always seems to crop up in financial panics despite deposit insurance: Could it possibly make more sense to stash cash in a mattress than in a bank account?

"It sounds like a joke," said business owner Mauricoa Quintero as he recently paused outside a Wachovia Bank branch in Miami. "But it sounds safer than the turmoil out there right now." .............(more)

The complete piece is at: http://biz.yahoo.com/ap/081005/shaky_banks.html

[Recursion]

1. The big investment banks brought about the crisis...

...in order to be able to gobble up the few remaining small financial firms.

Like a lot of other wars along those lines, this one blew up in the faces of the people waging it.

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2. It was prdicted home foreclosures to hit 2-1/2 millon in 09...