Bank Failure Friday: Rocky Mountain Edition

Southern Colorado National Bank of Pueblo, Colorado
Jennings State Bank of Spring Grove, Minnesota
Warren Bank of Warren, Michigan

None of these banks are very large (except for maybe Warren Bank with $500 million in deposits).
But what is significant is that these banks are #96, #97, and #98 on the year. We should hit the century mark next week.

I should also note that two credit unions also got shut down today:
The Members’ Own Federal Credit Union of Victorville, California
and Clearstar Financial Credit Union in Reno, Nevada

Subject Meta: 

Forum Categories: 

FYI - according to Calculated Risks list

Of failed banks a huge majority of those failed banks were classified as "State charter Fed nonmember commercial bank supervised by the FDIC".

Was there or is there a problem w/ FDIC regulatory scheme? - Financial Information for the Rest of Us.

commercial bank

commercial bank is defined, but as I understand it, this means they have a lot of loans in CRE, which is tanking....badly. I don't know what each of these failed banks holdings are, but in the case of Georgia, I believe a host of businesses have failed around real estate. i.e. construction companies, contractors, real estate developers and so on. They were heavily extended, developing a massive amount of properties thinking the housing bubble would just continue.

But there is imploding commercial real estate right now, so you might look to see what percentage of holdings these various failures had.

Hot Money.

Your take on Georgia is right on Robert. I would also add Alabama in this category. The failed banks were largely state chartered banks heavily investing in the residential and commercial construction bubble throughout the Southeast and Arizona. Remember, these are among the reddest of red states (i.e.- laissez faire, tax subsidies, no regulations, etc., etc., ad nauseum). These were ponzi scheme types that attracted a lot of "hot money" which fueled fantastic growth in their organizations in a very short period of time. As we are seeing, these smaller "houses of cards" are now crumbling. The FDIC was ill-prepared to deal with this level of failure and the larger ponzi schemes of Wall Street, the Treasury, and the Fed's QE will be that much more difficult to continue. The government's efforts to deal with the financial crisis during the past year has been a fool's errand at best. At worst, it has been the largest criminal fraud ever perpetrated in human history.

But how did it get to this point.

Most of these failed banks were suppose to be supervised by FDIC. Hot money via brokered deposits may have had a huge impact on the situation.

But was the FDIC doing - twiddling their thumbs? - Financial Information for the Rest of Us.

"Free" market?

Maybe they were just waiting for the "invisible hand" of the free market to take care of things. Seriously though, back when stopping any of this was possible (2003-2006?) there was virtually no regulation being enforced. Now, it's such a massive problem it appears to me that they just pick a few out of the many each week and chip away at it.

BTW, MSNBC put up this very useful bank tracking service a while back and it is updated pretty regularly. You can check any bank or credit union to find how bad or good of shape it is in. They also publish some reports on the total banking system.

bank tracker

Great site but how paranoia inducing! I just checked some of my own accounts, watching the liabilities dramatically increase in 1 year.