While retail sales have started to improve a bit, and the rate of new job losses is slowing, U.S. banks are failing at an increasing rate, with those crumbling during this crisis reaching 133 over the weekend. The growing failures can't be explained away as a lagging indicator: delinquencies are still growing. And regulators say that with residential and commercial mortgages still in distress, failures will keep growing into 2010.
The Alphaville blog at the Financial Times plotted the cumulative number of failures:
...[V]iewed as a cumulative chart, [the data] shows an upward trend in US bank failures. Indeed, for the geeks among you, the bank failures (red line) so closely mirror the exponential trendline (black), [that] the R squared is 0.9948. That does not mean, of course, that bank failures will continue along their current exponential path. But it does mean they haven't slowed down in any significant sense - yet.This graph, from the December report by the overseer of the TARP, shows the number of banks as well as the assets involved, and compares it to the famed S&L crisis of 20 years ago:
Figure 11 shows numbers of failed banks, and total assets of failed banks since 1970. It shows that, although the number of failed banks was significantly higher in the late 1980s than it is now, the aggregate assets of failed banks during the current crisis far outweighs those from the1980s. At the high point in 1988 and 1989, 763 banks failed, with total assets of $309 billion. Compare this to 149 banks failing in 2008 and 2009, with total assets of $473 billion.Looking behind the failures, delinquencies of all sorts are rising faster than the number of failing banks (also from the TARP report):
Sheila Bair, head of the FDIC, appeared on CNBC this morning, and calmly said that bank failures will keep growing in 2010.
In the blogging world, the ax on banks is Calculated Risk. He takes the prediction a step further, saying he expects a greater number of failures in 2010 than in 2009, and adds:
An industry contact told me this weekend that they expect 400 bank failures in 2010.And today Citi says it can stand on its own from here on. Let's hope so.