Almost 10% of FDIC-insured banks "troubled

Marketwatch ^ | 02/23/2010 | Ronald D. Orol

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WASHINGTON (MarketWatch) -- Driven by expanding problems with commercial real estate loans, the number of distressed banks in the U.S. rose to 702 in the fourth quarter, marking the highest level in 16 years, according to a report released Tuesday by the Federal Deposit Insurance Corp.

That's up from 552 at the end of September and 416 at the end of June. This is the largest number of banks on the FDIC's "problem list" since June 30, 1993.

Based on the result, roughly one in 11 of the approximately 8,000 U.S. banks are on this list, with regulators expecting a significant expansion in the number of failures throughout 2010, boosted in large part by increased losses on commercial real estate sustained by mid-sized and smaller banks. See more on analyst expectations for 2010 bank failures.

"This year, the losses are going to be heavily driven by commercial real estate, we've known for some time and we have been projecting that," FDIC Chairwoman Sheila Bair told reporters. "The pace is probably going to pick up this year and for the total year it will exceed where we were last year. Overall, the banking system is challenged but stable, but is performing its credit extension role."

Bair said it takes longer for losses on commercial real estate to work through the system because frequently borrowers may have cash reserves and can continue to make good on payments for a while, even as a downturn expands.

"Tenants may be in longer-term leases, but those leases eventually come due and they don't renew or they renew at significantly reduced rental rates," she said.

Also Tuesday, the National Association of Realtors on Tuesday reported that it doesn't expect any meaningful recovery in commercial real estate before 2011.

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A congressional watchdog group reported on Feb. 11 that it over the next few years, a wave of commercial real estate loan failures could threaten the U.S. financial system, and in the worst-case scenario, hundreds of additional community and mid-sized banks could face insolvency.

[perfect_rovian_storm]

And that's with Mark-To-Fantasy™. Imagine if they really had to calculate their balance sheets honestly!

[DefeatHitlery08]

This is the largest number of banks on the FDIC’s “problem list” since June 30, 1993.

I remember that, I believe the president was Bill Clinton

[rabscuttle385]

*Ping!*

[FourPeas]

Sounds like the Democrats’ plan is working. Can’t let a good crisis go to waste, especially not ofter you were able to create it yourself.

[b4its2late]

Here's the failed list since October 1, 2000

[JasonC]

When you count the banks and not the assets, you are spinning wildly. The dust of small fry can have problems. But the top 4 US banks have 80% of the money supply between them, and they aren't in trouble. The total assets (not losses, all affected assets) of all the failed banks since the crisis began come to a little over $200 billion. That is 10% of the size of one of the large banks, and 2% of total MZM money supply.

[stephenjohnbanker]

Commercial real estate will cause many to fold.

[sten]

that chart says volumes when you consider congress was taken by the progressives starting jan 2007...

[GOPJ]

Only 10%? Seems kinda low to me.

[CaliforniaCon]

I want to see the list of still troubled banks, not just those that have already failed.

Alas, I’ve been unable to uncover that ‘troubled’ list anywhere. Well kept govt. secret????

[PAR35]

Don’t you mean they are TBTF?

[RSmithOpt]

I find it interesting how so many 'college educated' MBA types running the medium / small banks bought into the BS of backing the commercial real estate bubble.

Knowing the economy is historically cyclic and consumer spending accounts for roughly 70% of economic activity, seems that handing out investors' monies so freely was excessively risky.

Then again, with so much manufacturing of domestic goods having been farmed overseas, guess there wasn't many places left to invest that money.

The US economy, for most Americans will crash soon because of poor government through the last 3-4 decades.

[JasonC]

Big enough to matter and sound enough they aren't going to fail. Citi might have without the help; with it, it won't.

And everyone peddling both opposition to it, and the endless doom, is living in the past. It was needed, it was done, it worked, its over. Now get a life and move on.