Monday, February 09, 2009

Dominos are falling




I just noticed that the several banks when under last Friday and I decided to go to the FDIC home page and get a total count for the year. While I was there I decided to look at other years failures to point out the trend and this is what I found

2007 1 lone failure
2008 24 failures
2009 9 already and its only Feb 9th



If this trend continues at only the average of 4.5 every month we could be heading for over twice last years failures, however if we go with the higher number of 1.5 banks a week so far this year we are looking at 78 failed banks.

From the existing 9 bank failures there is total cost to the FDIC of somewhere just over $1.2 Billion or $133 Million for each bank. Multiply that by 78 expected bank failures and the total losses for the FDIC would be about $10 billion which is actually not that high considering one of last years biggies like Indy Mac was estimated to cost the FDIC from between $4-8 billion alone.

Of course our 9 bank sample for this year is small and so far and does not reflect the presence of some of the larger banks that failed last year. My estimate for last year puts total cost to the FDIC at over 6.5 billion or 271 million per bank which extrapolated forward to our 78 bank target this year could put us at about $21 Billion.

NOTE, Last years numbers from the FDIC reports do not give an estimate FDIC cost for the WaMu failure, so real numbers could even be higher


So my quick and amateurish look at the FDIC liabilities for this year could range anywhere from about $10 billion to over $20 Billion.

I guess compared to TARP and the stimulus packages its pretty insignificant but it does show that FDIC will probably need a bailout next year if not later this year.


Just something else to consider.

1 comment:

private investment funds said...

Interesting - not one has gone under in the UK retail market but thats down to government money.