Monday, May 12, 2008

Bank Failures

Bank Failures have been really low. CR pointed out ANB Financial failed in Bentonville Arkansas. Why would that matter? To me, its because when I found out about the housing bubble in NW Arkansas, it finally struck me that this was a global phenomenon. I had already known about Spain and Australia, but for some reason having an obscure corner of the US bubble made me understand the global scope of the bubble.

Updated CR article

original CR article

Now Bentonville is the headquarters of Walmart. Until a few years ago, Walmart was expanding there so quickly, that flipping real estate was a sure fire way to make money. But Walmart hasn't been expanding very quickly domestically for about 3 years! So quite a few stuck flippers.

$214 million for the FDIC is chump change. But look at the image. This bank failure will consume about a week's worth of collections by the FDIC. If we go into a deep recession, we'll once again find the FDIC under-capitalized. :( This is why I have ranted about loose lending. The mistakes of the past are coming home. Can we pay for them all?

Bank failures are certainly a lagging indicator. But it is also a driving factor (bank failures tighten up credit).

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