"Every Friday evening a few more banks are closed — seized by the various state banking regulators and handed over to the Federal Deposit Insurance Corporation (FDIC) for liquidation. This all happens rather quietly, barely making the news. We're told these bank failures are no big deal. No reason to panic. The names of the banks change over the weekend and many customers don't notice the difference.
We've only had 294 failures this cycle, but it is a big deal: adjusted to current dollars, the Depression banking crisis was $100 billion, the S&L crisis was $923 billion, and the current crisis is nearly $8 trillion.
So while FDIC chairwoman Sheila Bair said the current crisis would be "nothing compared with previous cycles, such as the savings-and-loan days," it's actually much bigger, because the financial sector had grown to be nearly half the economy by 2006 — as measured by the earnings of the S&P 500.
But the question is, Why haven't there been more bank failures? In 2008, there were 25 failures, last year there were 140, and so far this year 129 have been seized on Friday nights. The greatest real-estate bubble in history has popped — first residential and now commercial — and we only have 294 failures?" Read more
"Bank Failures in Slow Motion"
Mises Daily, October 27, 2010.
Via the Ludwig von Mises Institute
Image by Pixomar / FreeDigitalPhotos.net.