Last week, bank failures quietly passed the 100 milestone for the year. I say “quietly” because the bank failure story has gone largely unreported or, at least, under-reported by the mainstream media. Just to give you an idea of how fast the bank insolvency problem is accelerating, last year, at this time, 64 banks had been taken over by the Federal Deposit Insurance Corporation. So far, this year, 103 banks have already been taken over by the FDIC. There is no question the bank failures the FDIC will have to deal with will be greater than the 140 insolvent banks closed last year. At this point, we just don’t know how many more, but dozens more than last year for sure.
One big bank negative I see is the loss of business in the Gulf because of the oil spill catastrophe. I don’t think it is a stretch to say that the loss of revenue from fishing, deep-water oil drilling, tourism and spoiled coastal property will probably have a negative effect on the balance sheet of Gulf Coast banks. Just 2 weeks ago, a Wall Street Journal story documented tail spinning Florida banks asking for a break from federal regulators. It said, “Florida banks—already weakened by the real-estate bust and hit again by customers suffering from the BP PLC oil spill—are asking federal regulators for a reprieve from government-ordered capital raising as they struggle to stay alive.” (Click here for the more on the WSJ story.) There are currently 775 “problem” banks on the FDIC’s list, and I don’t think that list will be shrinking anytime soon.