Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

FDIC: 903 U.S. Banks in Trouble, What to do …

Stock-Markets / Credit Crisis 2010 Nov 22, 2010 - 08:48 AM GMT

By: Martin_D_Weiss

Stock-Markets

Best Financial Markets Analysis ArticleMartin here with an urgent update on the next phase of the banking crisis.

Just this past Friday, the government released new data showing that the FDIC’s list of “problem banks” now includes 903 institutions.


That’s ten times the number of bad banks on the FDIC’s list just two years ago.

The banks on the list have $419.6 billion in assets, or SIXTEEN times the amount of two years ago.

And yet, these bad banks are …

Just the Tip of the Iceberg!

How do we know?

Because the FDIC has consistently neglected to include the most endangered species on its list of problem institutions — the nation’s megabanks that are among the shakiest of all.

The FDIC doesn’t reveal the names of the banks on its list — just the number of institutions and the sum total of their assets.

Still, I can prove, without a shadow of doubt, that the FDIC’s list of problem banks is grossly understated and inadequate.

Consider what happened on September 25, 2008, for example.

That’s the day Washington Mutual filed for bankruptcy with total assets of $328 billion.

But just 30 days earlier, according to the FDIC’s own press release, the aggregate assets held by the 117 banks on its “problem list” were only $78 billion.

In other words …

Washington Mutual alone had over FOUR times the sum of ALL the assets of ALL the banks on the FDIC’s list of problem banks!

Obviously, Washington Mutual was not on the FDIC’s list.

Obviously, the FDIC missed it. Completely.

Also not on the FDIC’s list: Citicorp and Bank of America, saved from bankruptcy with $95 billion in bailout funds from Congress. Just these two banks alone had over FORTY-SEVEN times more assets than all of those the FDIC had identified as “problem banks.”

Some people in the banking industry seem to think the FDIC can be excused for missing the nation’s largest bank failures for the same reason that blind men groping in the dark can’t be blamed for missing an elephant in the room.

But the fact is that the FDIC even missed the failure of a relatively smaller bank: IndyMac Bank.

When IndyMac failed in July 2008, the 90 banks on FDIC’s “problem list” had aggregate assets of $26.3 billion. But IndyMac alone had $32 billion in assets. Evidently, even IndyMac was not on the FDIC’s radar screen.

This is …

Easily One of the Greatest Financial Scandals of Our Time

The FDIC’s problem list is supposed to guide banking authorities in their efforts to protect the public from bank failures. If the FDIC is missing all the big failures, where does that leave you and me?

Heck — it’s bad enough that they refuse to disclose the names of endangered banks. What’s worse is that they’re hiding the truth from their own eyes.

And with so many misses so evident, you’d think they would have changed their ways by now.

Not so.

Even as I write these words to you this morning, banking authorities are AGAIN failing to recognize, analyze, scrutinize, or tell the public about the real impact of the most intractable disaster of this era:

Major U.S. Banks Still Extremely Vulnerable to the Foreclosure Crisis

Here are the facts …

Fact #1. JPMorgan Chase, Wells Fargo Bank, and Bank of America each have more than $20 billion in single-family mortgages that are currently foreclosed or in the process of foreclosure.

Fact #2. Each bank has at least DOUBLE that amount in a pipeline of foreclosures in the making — $43 billion to $55 billion in delinquent mortgages (past due by 30 days or more).

Naturally, not all of the past-due loans will ultimately go into foreclosure. But these figures tell us that the biggest players are not only in deep, but could sink even deeper into the mortgage mayhem.

Fact #3. Combining the foreclosures and delinquent mortgages into a single category — “bad mortgages” — the sheer volume still on their books is staggering:

  • JPMorgan Chase (OH) has $65 billion in bad mortgages …
  • Wells Fargo Bank (SD) has $68.6 billion, and …
  • Bank of America (NC) has $74.9 billion.

Fact #4. The potential impact of these bad mortgages on the bank’s earnings, capital — AND SOLVENCY — is dramatic. Compared to their “Tier 1″ capital …

  • SunTrust (GA) has 57.6 percent in bad mortgages …
  • Bank of America has 66 percent in bad mortgages …
  • JPMorgan Chase has 66.8 percent, and …
  • Wells Fargo has 75.4 percent.

Tier 1 capital does not include their loan loss reserves. But even if you included them, the exposure is still huge.

Moreover, this data is based on the banks’ midyear reports. Since then, we believe the situation has gotten worse.

And these numbers reflect strictly bad home mortgages! It does not include bad commercial mortgages, credit cards, construction loans, business loans, and more.

Here’s the key: Based on their size alone, we KNOW that none of these giant institutions are on the FDIC’s list of “problem banks.”

Yet they are all definitely WEAK, according to our Weiss Ratings subsidiary, the source of this analysis on bad mortgages.

Moreover, “weak” means “VULNERABLE,” according to the analysis of the Weiss ratings provided by the U.S. Government Accountability Office.

To help make sure your money is safe, I have four recommendations:

Recommendation #1. Don’t keep 100 percent of your savings in banks. Also seriously consider Treasury bills — bought through a Treasury-only money market fund or directly from the Treasury Department.

Don’t be put off by their low yield. The primary goal of this portion of your portfolio should not be the return on your money. It’s the return OF your money.

Recommendation #2. The only real risk in holding U.S. Treasury bills is the likelihood of a falling U.S. dollar. But don’t let that alone prompt you to run away from safe investments and rush into high-risk investments. Instead, stick with safety and protect yourself from a dollar decline SEPARATELY, with hedges against inflation, such as gold.

Recommendation #3. For checking accounts, money market accounts, and CDs that you have in a bank, be sure to keep your principal and accrued interest under the FDIC’s insurance limit of $250,000.

Recommendation #4. Given the magnitude of the potential crisis … given the limited resources of the FDIC … and in light of the strong anti-bailout sentiment of the new Congressional leadership … I feel you must not count exclusively on the FDIC or any government entity to guarantee your savings.

Instead, make sure you do business strictly with financial institutions that have what it takes to withstand adverse conditions on their own, even without a penny of government support.

Do your best to avoid banks with a Weiss rating of D+ (weak) or lower and seek to do business with banks that we rate B+ (good) or higher. Stay safe.

Good luck and God bless!

Martin

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in