Merry Christmas and a Happy New Bank!

Bank failures continue. Every week (usually on Friday), the FDIC moves in and takes over a few more failing banks. Most are in trouble because of bad commercial loans. There was one striking example locally where an investor group led by a Realtor bought a 5 million dollar property and couldn't even pay the taxes on it from the rents. It sold for less than half that in foreclosure. Although the bank that lost about three million dollars on that one loan was not in this state, some local banks have made similarly bad decisions.

[Memo to the right wingnuts: There has been no change in the law regarding loans to poor people to encourage home ownership, yet the banks have tightened up their lending practices. That is what mathematicians call a counterexample to the claim that politics rather than greed caused lenders to loan money without checking anything. Another counter example would be where a Swiss bank nagged an owner into refinancing a now-bankrupt resort so they could earn the origination fee.]

So how can you tell if your bank is over extended? How can you find out how many toxic loans it has, or how many bank-owned properties it owns? Easy:

An MSNBC story provided a nice, color coded map showing the extent of the problem on a state-by-state basis with links to a separate "bank tracker" site. The main article only does banks, but if you go to the main site you can choose (top of the left column) to look for banks or credit unions as well as their methodology and who has obtained TARP funding.

It is worth a look, although you do have to know where your bank has its headquarters.

What I like is that they show the time dependence of the bad assest ratio in a bar graph, so you can see the trend as well as the raw numbers in a table. For perspective, the reason their bar graphs don't max out when a bank gets to a 100% ratio between troubled assets and capital plus reserves is that the ones that have been taken over can be in the 300% to 600% territory. However, that is not the only metric. I saw one bank where the ratio was just over 100% but they had been losing over a hundred million dollars a quarter for a year.

I was glad to see that our banks and our credit union are in reasonable shape. One has a ratio around 40%, but it has been stable for most of the year and they are still making a profit. Not so for another local bank, which has advertised how helpful it is to local businesses. Their ratio has been going up by leaps and bounds, hitting 100% last quarter along with a large negative profit. I wouldn't buy any stock in that one!

And always remember: the cap on FDIC insurance applies to the sum of all of the accounts in your name, not each account.