One Thousand Banks Closed?

Could 300 to 400 banks be closed by the government this year? It’s likely. Currently 185 banks have been seized by the government. Another 300 would almost reach the halfway point to a thousand and it is highly unlikely that the current economic crisis will have significantly improved in a single year.

James Dunne, senior managing principal of Sandler O’Neill, said 300 to 400 banks could be seized this year, especially as institutions start to deal with deteriorating commercial real estate loans.

He believes as I do that the collapsing real estate market is going to produce serious losses in bank income. Those of you who take my classes are well aware of my predictions of a serious commercial real estate crisis and a further increase in the seriousness of our current economic plight.

The FDIC reports there are 702 banks on its problem bank list. Of course historically only a little more than a fourth of the banks on the list have failed. I believe we are in a far more serious economic crisis than we have seen before and I strongly agree with James Dunne’s numbers except that I think will be worse. I’ll predict 450 closures by the end of this year.

This is going to be a long, hard economic crisis and we have NOT encountered the worst.

James Pilant