IndyMac: Just the Tip of the Iceberg?
Following the Fed’s Friday takeover of Countrywide’s spawn, Indymac, and amid mass speculation regarding the solvency of the Fed’s chartered duo FannieMae and FreddieMac, reporters and analysts twittered all weekend trying guess which ailing financial institution is most likely to fall next.
Naming names at this point may be difficult to do with much accuracy because, as the New York Times points out, even the beleaguered IndyMac escaped the Fed’s last list of financial institutions that it considers to be at risk of financial failure. Come August, when the Fed is scheduled to update its rankings, it seems inevitable that this list will grow.
… And the Band Played On
In a statement issued just before the Asian markets opened Monday, and well-before the morning’s widely anticipated auction of Freddie Mac debt, the U.S. Treasury Department said it’s asking Congress to extend its line of credit should Freddie or Fannie need stealth intervention.
This news comes on the heels of the Fed’s seizure of Indymac on Friday. Clearly, the housing market’s woes and floundering U.S. economic growth create suffocating conditions for the banking industry. Though some of my best friends are bankers, I wouldn’t give any of them a deposit over $90,000 these days. And to anyone who is flying commando with unsecured deposits, I know a guy who could totally hook you up with a deal on some “gently used” Countrywide Financial Corp. stock.
More Banks Poised for Failure
The New York Times reports what more banks are destined for failure in light of current analyst reports: “The troubles are growing so rapidly at some small and midsize banks that as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months, analysts say.”
Banking Analyst Richard Bove issued a list of at-risk banks over the weekend. In his “Who Is Next?” report for Ladenburg Thalmann, Bove named banks he considers to be in the “danger zone.” CNBC reports that some of these financial institutions include: Downey Financial, Corus Bankshares, Doral Financial, FirstFed Financial, Oriental Financial, and BankUnited Financial. According to Calculated Risk, even Washington Mutual was named in the report where Bove divided non-performing assets by reserves and added common equity.
MarketWatch says that Downey Financial reports its non-performing assets hit 14.33 percent of its total assets in May, up from 10.75 percent at the end of February. Last year, the institution’s non-performing assets were a mere 1.3 percent. Such a slip in not unprecedented in 2008. Even without Countrywide’s Angelo Mozilo’s tutelage, mightier institutions have fallen.
Who’s Who of Financial Blunders?
Including IndyMac, Calculated Risk reports that five banks have hit the pavement so far in 2008, and that number is likely to grow as larger banks struggle to meet their current set of challenges:
2008 Bank Failures and Deposit Amounts
- Douglas bank: $53.8 million
- Hume bank: $13.6 million
- ANB Financial: $1.8 billion
- First Integrity: $50.3 million
- IndyMac: $19.06 billion
Running with the Devil
Monday is bound to be a rough one, folks. Like I mentioned here when Bear Stearns crashed a few months ago: I know I predicted in Q4 2007 that a major bank would fail, but this is getting ridiculous! For those of us who remember the Savings and Loan fiasco of the late 1980s and early 1990s, this news may be especially hard to take. (If only we were dealing in penny stocks and Main Street institutions today instead of the global economy and Wall Street….) Mr. Keating: Please take a bow, you’ve been replaced.
I spoke with a highly-regarded financial adviser over the weekend who said she has more faith in a platinum Van Halen comeback than she currently has in the markets. Her advice these days is golden, if you know what I mean. Most of the financial experts I know are at a loss for words at the moment. Maybe that’ll change when Freddie hits the block — either auction or chopping. Who can say at this point? What do you think about this mess? Drop me a line and let me know how you see it in your part of the world.
July 22nd, 2008 at 12:08 am
[...] week, I poated a Blog that examined a report titled “Who is Next?” written by seasoned Ladenburg Thalmann [...]