Current Events, Meltdown

Problem bank list balloons to 171


From The Street:

The Federal Deposit Insurance Corp.’s list of problem banks ballooned nearly 50% as banks profits nearly evaporated in the third quarter, as the credit crisis reached its boiling point, the agency said Tuesday.

Net earnings of commercial bank and savings institutions under the FDIC’s protection totaled just $1.7 billion in the third quarter, down 94% from a year earlier, according to the FDIC’s quarterly banking report, which was released Tuesday. The quarter was the second weakest, following the fourth quarter of 2007, since 1990, according to the agency.

There are roughly 171 banks, up from 117 institutions, with a combined total of $115.6 billion in assets under the FDIC’s watch currently, according to the report. But FDIC Chairwoman Shelia Bair said at a press conference in Washington, D.C. that “most banks remain well-capitalized, profitable, and sound.”

“It’s not news to any of us that we’ve had profound problems in our financial markets that are taking a rising toll on the real economy,” Bair said.”[Tuesday's] report reflects those challenges. As we had expected industry earnings for the third quarter were substantially below the prior year.”

Bair continued that while many large institutions continue to post losses “due to weaknesses in their portfolios,” the FDIC is “now seeing losses spread to a growing number of smaller institutions.”

And the almost-universal common factor affecting all of these banks? Bad bets on real estate.


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