Is Your Bank on the "100 Safest" List? Maybe You Should Find Out
Close to Collapse: Bailed-Out Banks Facing Bankruptcy
January 4, 2011
By Elliott Wave International
"Nearly 100 U.S. banks that got bailout funds from the federal government show signs they are in jeopardy of failing.
The total, based on an analysis of third-quarter financial results by The Wall Street Journal, is up from 86 in the second quarter, reflecting eroding capital levels, a pileup of bad loans and warnings from regulators.
The 98 banks in shaky condition got more than $4.2 billion in infusions from the Treasury Department under the Troubled Asset Relief Program."
Wall Street Journal (12/26)
"...your money is only as safe as the bank's loans. In boom times, banks become imprudent and lend to almost anyone. In busts, they can't get much of that money back due to widespread defaults.
If the bank's portfolio collapses in value, say, like those of the Savings & Loan institutions in the U.S. in the late 1980s and early 1990s, the bank is broke, and its depositors' savings are gone."
Conquer the Crash, 2nd edition, pp. 175-176
"...did you know that most of the FDIC's money comes from other banks? This funding scheme makes prudent banks pay to save the imprudent ones, imparting weak banks' frailty to the strong ones.
When the FDIC rescues weak banks by charging healthier ones high 'premiums,' overall bank deposits are depleted, causing the net loan-to-deposit ratio to rise.
The result, in turn, means that in times of bank stress, it will take a progressively smaller percentage of depositors to cause unmanageable bank runs."
Conquer the Crash, 2nd edition, p. 177