Busted: Bankers and The Global Economy

March 13, 2008

Massive Bank Failures Still Expected

In the past year there have been four bank failures. The chairman of the Federal Deposit Insurance Corp and banking industry experts foresee many bank failures down the road. “Regulators are bracing for 100-200 bank failures over the next 12-24 months,” says Jaret Seiberg, an analyst with the financial services firm, the Stanford Group. Expected loan losses, the deteriorating housing market and the credit squeeze are blamed for the drop in bank profits.

All this bad news is expected despite the recent moves by the Fed to bolster the banking system to the tune of $200 billion in 28 days cycles through September. The Fed has also just increased the Fed TAF auction to $100 billion for the indefinite future through September. This is a huge hunk of credit to temporarily sustain the banking economy. Perhaps the move by the Fed is simply a grand tactic to forestall any problems through the election if bank failures are still expected on a grand scale. Is the reaction of the Federal Reserve overkill or admission of the seriousness of the economic situation facing the U.S. and other parts of the economic world? What do you think? Don’t hold back.


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