Could up to 300 more banks fail as a result of the worsening debt crisis?
*Reuters, by Jonathan Stempel, July 13, 2008:
“More U.S. banks may fail after the collapse of mortgage lender
IndyMac Bancorp Inc, straining a financial system seeking stability
after years of lending excesses.
More than 300 banks could fail in the next three years, said RBC
Capital Markets analyst Gerard Cassidy, who had in February estimated
no more than 150.
Banks face pressure as credit losses once concentrated in subprime
mortgages spread to other home loans and debt once-thought safe. This
has also led to investor worries about the stability of mortgage
finance companies Fannie Mae and Freddie Mac; IndyMac is not related to
either.
While analysts decline to speculate about which banks might fail,
several smaller lenders and even larger ones appear to have elevated
levels of soured loans relative to their sizes.
‘You have to look at companies with the greatest exposure to the
highest-risk assets, which include construction loans and exotic
mortgages,’ Cassidy said. ‘The final nail in the coffin for any
depository institution would be a funding crisis where it is unable to
gather deposits at reasonable cost, or wholesale funding markets are
cut off.’
The Federal Deposit Insurance Corp (FDIC) seized IndyMac on Friday
after a bank run in which panicked customers withdrew more than $1.3
billion of deposits in 11 business days.
This followed comments on June 26 by U.S. Sen. Charles Schumer
questioning the Pasadena, California-based thrift's survival. Some
withdrawals also followed IndyMac's July 7 decision to fire half its
work force and halt most mortgage lending.”
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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