The FDIC announced the closure of another 5 banks this week, bringing the total to 69 this year so far. See the chart below to put this in perspective. Given that the FDIC said there are still another 305 banks in “troubled waters”, we can kind of present a scenario and a theory of things to come. Being insane as I am, I can then estimate when the banking holiday begins!! Looks right now like late January 2010. Well you judge my logic.
The chart above represents 3 failures in 2007, 25 in 2008, 69 so far in 2009, 120 projected total for 2009, and finally 215 failures are projected for 2010. So in this period, 358 banks will fail. When comparing to 1929-1933, 4,000 banks had failed. But unlike today, banks then didn’t have branches. So when you look at this in today’s number and you use an average of 10 branches per bank of today, we can expect 3580 1929 adjusted numbers. We assume that of the existing FDIC indentified 305 troubled banks, 70% will fail, if consistent with current trends.
OK, now let’s again look at historical facts and compare them with the facts of today. On March 3, 1933, FDR declared a banking holiday. You gotta love those holidays where everybody gets screwed. The reason he closed the banks were that the existing banks (-4000) were getting clogged with commercial real estate foreclosures creating unsalable assets. Ok let’s fast forward. MSM is leading stories that warn of the new crisis is what??? Commercial and Construction loans. De J’Vue?
Today the FDIC announced it only has $13 Billion left in the FDIC Insurance Account. Given the rate of bank failures and that the average bank closure is costing the FDIC about $250 Million that gives us a cross over the line date of the last week in January 2010. Secondly, in the same release, the FDIC says it expects about $10 Billion in future costs. However, when I do the calculations, the number is more like $89.5 Billion. So the FDIC is not only light by January 2010, it is missing the correct planning number by at least 8 times!
So given all these FACTS, and being insane as I am, I will now say look for the banking holidays from January 15th to February 15th 2010. Gee, I wonder if Hallmark will come up with a card?