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The
Wall Street Journal reports 98 shaky TARP recipients are on the verge of
failure as bad loans pile up. Please consider Bailed-Out
Banks Slip Toward Failure
Nearly 100 U.S. banks that got bailout funds from
the federal government show signs they are in jeopardy of failing.
The troubled banks identified by the Journal all have either a Tier 1 capital
ratio under the "well-capitalized" 6% level; both a total
risk-based capital ratio of under the "well-capitalized" 10%
threshold and nonperforming loans of over 10% of their portfolio; or a
regulatory order requiring the bank to monitor or boost its capital.
A Federal Deposit Insurance Corp. spokesman declined to comment on the
Journal's analysis, which also calculated that 814 of the nation's 7,760 banks
and savings institutions are troubled according to these standards, up from
729 at the end of the second quarter. The FDIC's official list of problem
banks, which uses different criteria from the Journal's analysis, includes
860 financial institutions. The banks aren't publicly identified.
One example of a TARP recipient in deep trouble: closely held Legacy Bank of
Milwaukee. José Mantilla, Legacy's president and chief executive, said
the bank lends to an underserved, lower-income customer base.
As Legacy Bank
careens towards failure, it appears its customer base was not
"underserved" but rather "overserved".
Most of these failures will be relatively small ones. The median TARP
infusion for the 98 banks was $10 million. The grand total of the 98 banks was
about $4.2 billion. In contrast the first 8 large recipients received a total
of $125 billion, now repaid.
Commercial real estate loans gone sour are at the heart of many small bank
failures. One consequence of these failures is the too big to fail banks keep
getting bigger.
Citigroup Too Interwoven to Fail, Chairman Says
As proof that Citigroup is one gigantic tangled mess, Citi
Chairman Richard Parsons boasts Citigroup
Too Interwoven to Fail
Citigroup
remains too "interwoven" to fail even after the government has
plowed billions into rescuing the banking titan and Congress has passed laws
taking aim at financial behemoths, Citi Chairman
Richard Parsons told CNBC.
"It's not a question of too big to fail," Parsons said in a live
interview. "It's a question of too interwoven in the fabric of the
global financial life to fail."
Parsons said allowing Citi to fail previously or in
the future would be akin to having "the heart, the
pump of the economic system fail because then everybody else
dies."
"It's probably the most important private financial institution for
maintaining our economic strength and presence around the world. You can't
let an institution like that go down," he said.
Do these clowns even
realize what they are saying? Parsons just gave a superb reason Citigroup
needs to be broken up.
I suggest Citigroup should be forced to sell itself off piece by piece by
piece, until it is not "too interwoven to fail". The same applies
to Goldman Sachs and Bank of America.
Anything too big or too interwoven to fail, is simply too big.
In a free market with adequate fraud-prevention controls between various
operations, these banks would likely not have gotten so big in the first
place. They certainly would not have survived this global financial crisis if
they did.
These gargantuan banks only exist intact because of Fed and taxpayer
sponsored bailouts. Adding insult to injury, these banks pose the same
systemic risk as before. Topping it off, Citigroup has the gall to brag about
it.
Mish
GlobalEconomicAnalysis.blogspot.com
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