Out of Control Policy Blog

Are Banks Stabilizing?

If you're a superstitious person, you might avoid breathing while passing a graveyard, or keep your socks from touching carpet when the field goal kicker lines up for a game winning shot. I don't claim to believe much in superstition (though the Red Sox do seem to win whenever I wear my lucky hat) and as such won't claim credit for putting off the 100th bank failure this year, but there was a slow down in bank failures this month.

On Thursday, October 8, I posted a blog titled "Will We See Bank Failure #100 Tomorrow?" and noted that there had been a bank failure every week this year since June. In fact, there was only one week between June and the end of September that had less than two bank failures. But somehow, on October 9th, the FDIC didn't close the doors on anyone. Flash forward to October 16th, and just one failure is announced.

Now, it is sad to be thinking in terms of "just one" failure. It speaks to the still volatile nature of our banking system. The failure last Friday of San Joaquin Bank in Bakersfield, CA did push us to being one away from the daunting figure of 100 failures in 2009. Whether this trend will continue the rest of the month and into November is what to watch now. Unfortunately, there is still a lot of underlying toxicity in the banking industry and though its encouraging to see a slow down the past few weeks in failures, I fear we might not even be half way through the wave of bank failures. Superstition can only carry so far.

Anthony Randazzo is Director of Economic Research


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