Busted: Bankers and The Global Economy

September 5, 2008

FDIC: Dismal Banking and Another Failure

As you’ve probably heard by now, industry results for banking in the second quarter were pretty dismal. The results were not surprising as the industry coped with financial market disruptions, the housing slump, worsening economic conditions, and the overall downturn in the credit cycle.

The main reasons for the drop off are the same that we’ve been seeing since the second half of last year:

declining non-interest income,
rising non-interest expense,
decrease in gains on securities sales,
and mounting loss provisions.

The eleventh bank failure of the year came into play with Silver State Bank of Henderson, Nevada. What is the problem with banking? Mainly liquidity. That is often an elusive problem for banks with abused balance sheets and a nation full of securitized bonds that are pretty much worthless.

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