David Drake

U.S. regulators on Friday [November 20] closed down Commerce Bank of Southwest Florida. Though there are some early signs of economic recovery, bank failures go on growing with rising loan defaults. This takes the total number of bank failures to 124, compared to 25 in 2008 and 3 in 2007.

The government-administered insurance fund that protects depositors fell into the red for the first time since the fallout from the savings-and-loan crisis of the early 1990s as the pace of bank failures accelerated.

The fund had a negative balance of $8.2 billion at the end of the third quarter, federal regulators said Tuesday.

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So far, the F.D.I.C. has seized and sold 124 banks in 2009, and analysts expect hundreds more to collapse in the months ahead.

...with banks reluctant to lend and consumers afraid of borrowing, chances of a strong and quick economic recovery are slim, bankers and investors said at the Reuters Global Finance Summit this week.

"It will take at least a couple of years to come out of this recession," said Denis Salamone, chief operating officer of Hudson City Bancorp (HCBK.O), the biggest U.S. thrift.

CONSUMERS PULLING BACK

The U.S. economy grew at an annual rate of 3.5 percent in the third quarter, its first growth in more than a year. But the main impetus was government subsidies on cars and housing.

"We have to be cautious here because unemployment is still a big uncertainty, is forecast to continue to rise, and so we have to take a cautious outlook, even though things are notably better than they were a year ago," American Express Co (AXP.N) Chief Financial Officer Dan Henry said.

Unemployment rose to a 26-year high of 10.2 percent in October and is expected to be a drag on the economy for some time.

"Companies are not yet confident that we will be out of this. And some are concerned about a second dip coming out of this recession and, therefore, they are not hiring," Salamone said.

"People's consumption attitude is going to be different over a period of time, and I think that will lead them to not be the whole engine of the world economy," said Takeo Sumino, chief operating officer of Nomura Holding America, a unit of Japanese brokerage Nomura Holdings

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Mortgage delinquency rates and the percentage of loans in foreclosure jumped to record highs in the third quarter, according to the Mortgage Bankers Association. It forecast the trend will continue into 2010.

Credit card losses are seen peaking next year, and commercial real estate losses will likely become a big headache for more lenders.

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"If you think chargeoffs are bad now, wait until this unemployment rate sticks at 10 percent for over a 12-month time period," he said. "Everybody tries to live their lifestyle, and people only begin to change their lifestyle when they lose their job. Then reality sets in."

The Federal Deposit Insurance Corp. has closed about 10 banks a month so far this year, but that number is growing. The FDIC closed nine banks this weekend alone -- plus commercial lender CIT Group Inc. (NYSE:CIT) filed for bankruptcy. That brings the total number of banks that have failed this year to 115.

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So far in the last two years only 140 banks have failed. In October, 20 banks failed, and if that pace continues, then it is likely we could reach over 150 failures by the end of the year.

Boeing will hand out 60-day layoff notices today to about 500 employees companywide, including about 60 in Washington. About 40 of the 500 are with the Commercial Airplanes unit.

Boeing has been issuing layoff notices monthly since January, when it said it planned to cut 10,000 positions from its baseline employment of 163,356 on Nov. 30, 2008. Through the end of September, Boeing employment was down by just over 5,000 jobs companywide.

New York, October 3-- In yet another shutdown, the federal regulators on Friday closed three more banks in the nation, bringing the total to 98.

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FDIC’s funds depleting
The shutdown has been a costly affair for FDIC. The collapse of Warren bank is expected to cost the insurance fund roughly $275 million.

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With the economy still reeling under economic slowdown, FDIC has warned of more bank closures and expects the cost to increases to $100 billion in the next four years.

Since its funds are depleting, FDIC has long been contemplating borrowing money from healthy U.S. banks to keep its deposit insurance fund solvent.

Corus Bank, a $7 billion Chicago-based institution, was one of three banks closed by federal regulators on Sept. 11.

Venture Bank of Lacy, WA. and Brickwell Community Bank of Woodbury, MN. also were closed and acquired by other institutions.

This year's running tally of failed institutions now stands at 103 banks and credit unions that have been closed, acquired or placed into conservatorship.

Regional banks in Maryland, Minnesota and California were closed by regulators Friday, bringing the total number of failed banks this year to 84, the Federal Deposit Insurance Corporation said.

Baltimore, Md.-based Bradford Bank, which operated nine branches, will reopen Monday as part of Manufacturers and Traders Trust Company.

M&T, which is based in Albany, N.Y., agreed to assume all of Bradford Bank's $383 million in deposits and will purchase "essentially all" of its $452 million in assets, the FDIC said.

In Minnesota, the eight branches of Mainstreet Bank of Forest Lake will be taken over by Stillwater-based Central Bank.

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With Friday's closures, the number of banks shut this year is more than three times the number of banks that failed in 2008, and it's the highest tally since 1992, when 181 banks failed.

The majority of this year's failures have been small, regional banks that fell victim to losses on real estate and consumer loans as unemployment surged to a 25-year high. But there have also been a number of large institutions closed in 2009.

Last week, regulators in Texas closed Guaranty Bank, which had about $13 billion in assets and was the third-largest bank to fail this year. That came one week after Alabama-based Colonial BancGroup became the sixth-largest bank failure in U.S. history on Aug. 15.

The wave of failures is expected to continue, raising concerns about the size of the FDIC's insurance fund.

A mortgage trade group reported Thursday that more than 13% of the nation's mortgage holders were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That's the highest figure since tracking began in 1972. California's rate, 15.2%, was among the highest of all states.

The numbers underscore a worrisome trend. A spate of foreclosures -- which began with speculators who walked away from their souring investments, then spread to high-risk borrowers who couldn't make their payments when their low-interest mortgages reset -- is now hitting unemployed homeowners with good credit scores, clean financial histories and conventional home loans.

The U.S. has shed 6.7 million jobs since the recession began, employment losses that have left even high-quality borrowers struggling. One in three new foreclosures from April to June was from a prime, fixed-rate loan, up from 1 in 5 a year earlier. [ Let me remind the Pbama Cultists that during April to June, it is their Cult Leader, not W. Bush, who is responsible for this - Drake. ]

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The U.S. jobless rate in July was 9.4%, down slightly from 9.5% in June, a 26-year high. California's June unemployment rate was 11.6%. July figures will be released today.

New claims for US unemployment benefits rose unexpectedly for the second consecutive week, the government said Thursday, raising concerns that soaring jobless numbers could stifle recovery from prolonged recession.

The Labor Department said that initial jobless claims increased by 15,000 to 576,000 in the week to August 15, which happens to be the survey week for the monthly non-farm payrolls report, seen as one of the best indicators of economic momentum.

Most analysts had expected initial claims to fall to 550,000 in the past week -- the previous week's revised figure was 561,000 -- amid increasing signs that the recession since December 2007 was easing.

The July rate, up from 9.4 percent in June, was the highest for the city in more than 12 years.

Unemployment in the Las Vegas area jumped to 13.1 percent in July.

The state Department of Employment, Training and Rehabilitation said the 13.1 percent compares to 12.3 percent in June and to 6.9 percent in July a year ago. Statewide, unemployment rose from 12 percent in June to 12.5 percent in July with 179,300 persons jobless.

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...the jobless rate in the Reno-Sparks area rose from 11.7 percent in June to 12.2 percent in July. Carson City’s rate increased from 11.5 percent to 11.7 percent in July. Unemployment in Elko inched up from 6.6 percent in June to 6.7 percent in July.

Regulators shut down two banks and two thrifts Friday, bringing the total number of failed U.S. banks and savings and loans during 2009 to 81.

Guaranty Bank of Texas is the latest to be added to the gallery of failed financial institutions. Federal regulators seized the bank Friday night, the 10th-largest banking failure in U.S. history. It comes on the heels of last weekend's failure of Colonial Bank of Alabama, the 6th-largest failure.

Guaranty Bank had 103 branches in Texas and 59 branches in California. Guaranty Bank's branches, deposits and most of its assets were sold to Spain's Banco Bilbao Vizcaya Argentaria (BBVA), operating as NNVA Compass, Birmingham, Alabama.

As Wall Street banking giants reap the benefits of an upbeat stock market, commercial banks—often called the engine of our economy—continue to fail across the nation.

Colonial BancGroup became the largest bank failure of 2009 last Friday. Its assets were taken over by regulators and subsequently sold to BB&T Corp.

The failure of Montgomery, Ala.-based regional bank was the sixth-biggest in U.S. history with $25 billion in assets. Colonial operated 346 branches in the Southern United States across Georgia, Alabama, Nevada, Texas, and Florida.

The Federal Deposit Insurance Corp. announced on Friday the closure of five more banks all located in different states. The banks are in Texas, New Jersey, Ohio, Florida, and Oklahoma. This brings the total of banks that have failed to 69 this year.

Friday's bank closures will cost the FDIC fund $911.7 million, bringing the total cost for failed banks to $15.13 billion this year. That compares with $17.6 billion in all of 2008.

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The number of bank failures so far in 2009 has almost tripled last year's total of 25.

The 45 banks closed nationwide this year compare with 25 in all of 2008 and three in 2007.

State regulators shut down four banks Friday, the Federal Deposit Insurance Corporation said.

The bank were: First Piedmont Bank, based in Winder, Ga.; BankFirst, based in Sioux Falls, S.D.; Temecula Valley Bank of Temecula, Calif.; and Vineyard Bank of Rancho Cucamonga, Calif.

Friday's actions bring the total number of closings for 2009 to 57.

Georgia has claimed 10 of the casualties this year, more than any other state, according to David Barr, spokesperson for the FDIC.

Goldman Sachs Group Inc said quarterly earnings surged 33 percent on blowout trading results, trouncing forecasts and putting the bank on pace for hefty bonuses that could draw unwanted scrutiny.

The results continued Goldman's extraordinary rebound from a near meltdown of the U.S. banking industry last fall that led to a $125 billion taxpayer bailout for its largest members.

Goldman set aside $6.65 billion for salary, bonuses and benefits in the quarter, up by nearly half from the quarter ended in May last year.

That puts the average Goldman employee on pace to earn more than $900,000 this year. Chief Executive Lloyd Blankfein, senior officers and star traders will likely receive tens of millions of dollars.

The U.S. government wanted "to make sure that the banks are making money, so they do make money," said Francis Campeau, a broker at MF Global Canada in Montreal. "The flip side is now one could argue they're making too much."

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Reaction to Goldman's earnings was muted among U.S. lawmakers, some of whom have been harsh critics of Wall Street's excesses proceeding the credit crunch and bailout.

"I want all the people we gave money to make profits. Pay the money back with interest and have a net zero cost to our program," House Majority Leader Steny Hoyer told reporters.

Representative Paul Kanjorski, a senior Democrat on the U.S. House Financial Services Committee, said Goldman's soaring profits were a sign of economic recovery.

"Is there a law in the United States that you can't make profits?" Kanjorski asked reporters after a panel meeting.

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"There should be at least some ethical obligation on the part of the Goldman Sachs because their bonus pool is backed by taxpayers who are suffering through the poorest economy that we've seen in 70 years," said Rich Ferlauto, director of corporate governance and pension investments for the American Federation of State, County and Municipal Employees.

... facing mounting criticism of the $787 billion stimulus package, [Obama] devoted his weekly radio address to touting the successes of the plan and suggested it had to be given more time to show results.

"The Recovery Act was not designed to work in four months – it was designed to work over two years," Mr. Obama said, after telling listeners that the plan hadn't been intended "to restore the economy to full health on its own, but to provide the boost necessary to stop the free fall."

He concentrated in his remarks on the billions of dollars from a taxpayer-funded plan that will be disbursed this summer, although much what he was described was already in the works, spurring new debate about just how much the $787 billion stimulus package is helping.

"We've done more than ever, faster than ever ... to get the gears of the economy moving again," Obama said. Based on the work done across a broad spectrum of federal agencies during the first 100 days of the administration, the president said, "we're in a position to really accelerate."

President Barack Obama on Wednesday marked 100 days since signing his $787 billion economic stimulus package, saying it's created or saved more than 150,000 jobs and unveiling funding for two energy projects.

"It's clear that we have to act and we have to act now to address this crisis and break the momentum of the recession, or the next few years could be dramatically worse," Obama said.

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"There is a happy convergence between what I had pledged during the campaign and what's required for the economy, right now, to put more money into the pockets of ordinary Americans," Obama told reporters.

Vice President Joe Biden, who said [the stimulus] "shows early progress providing immediate financial relief for American families and jump-starting billions of dollars in job-creating projects." In a press release, Biden claimed the stimulus has so far "created or saved" 150,000 jobs, and that "over 3,000 transportation construction projects have been funded in 52 states and territories."

You don't have to look too hard to find problems with Biden's work. First, nobody seems to know precisely where the figure of 150,000 jobs comes from. When President Obama used it in a speech on April 29, the website FactCheck.org pretty much demolished the claim. Previewing the Biden report on May 11, a "senior administration official" held a conference-call briefing with reporters and seemed unprepared when asked where the created-or-saved jobs actually are. "In terms of exactly where and in what sectors, that's not something I have numbers on," the official said, "because, precisely, we don't yet have any of the reporting."

As far as the 3,000 transportation construction projects are concerned, there are certainly some under way, but nobody seems able to confirm a number so large. "I'll buy lunch for the first person who can get a list of those transportation projects," one Senate Republican aide told me. "That's absolutely not true."

The real news about the stimulus is buried inside the Biden report. It says that as of May 5, $88 billion has been "obligated" for spending. "Obligated" is federalese for money that has been committed but not yet spent. A much smaller number, $28.5 billion, has actually been shoved out the door -- that is, $28.5 billion out of the stimulus total of $787 billion has so far been spent.

And where did it go? More than 95 percent has ended up in just two places: the Department of Health and Human Services and the Department of Labor.

The president argued that the bill "has helped to fuel demand that is helping businesses put more Americans back to work" and said it has already saved or created nearly 150,000 jobs.

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...the president said the stimulus package was "designed not only to revive the economy in the short term, but to rebuild the economy over the long term."

Underemployment, where desperate workers take jobs that are not meeting their desired compensation, hours or level of skill and experience, increased to 16.5% in June from 16.4% in May. The underemployment rate last month was the highest since the Labor Department started tracking it in 1994.

Some analysts, such as Themis Trading’s Co-Manager of Trading Joe Saluzzi, believe underemployment is the “real” amount of unemployed people in the market.

“[16.5% is] the real amount if unemployed people out there. If anything you see wage growth is not there, hourly earnings and the workweek is lower. Now you have a recipe that is a mess here, because nothing is improving. People still want to say that unemployment is a lagging indicator, I don’t get that,” Saluzzi told Reuters.“The only thing we’ve got going is stimulus[.]

Regulators on Friday shut down five small banks, boosting to 45 the number of failures this year of federally insured banks. More are expected to succumb in the prolonged recession.

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The 45 banks closed nationwide this year compare with 25 in all of 2008 and three in 2007.