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U.S. May See 150-200 More Bank Failures

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US May See 150-200 More Bank Failures: Bove

Reuters
| 24 Aug 2009 | 01:07 PM ET

A prominent banking analyst said Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry’s payments to keep the Federal Deposit Insurance Corp afloat could eat up 25 percent of pretax income in 2010.

Richard Bove of Rochdale Securities said this will likely force the FDIC, which insures deposits, to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system.

“The difficulty at the moment is finding enough healthy banks to buy the failing banks,” Bove wrote.

The FDIC is expected on August 26 to vote on relaxed guidelines for private equity firms to invest in failed banks, after critics said previously proposed rules were too harsh and would actually dissuade firms from making investments.

Bove said “perhaps another 150 to 200 banks will fail,” on top of 81 so far in 2009, adding stress to the FDIC’s deposit insurance fund.

Three large failures this year — BankUnited Financial in May, and Colonial BancGroup, Guaranty Financial Group in August — collectively cost the fund roughly $10.7 billion.

The fund had $13 billion at the end of March.

Regulators closed Guaranty’s banking unit on Friday and sold assets of the Texas-based lender to Banco Bilbao Vizcaya Argentaria. The FDIC agreed to share in losses with the Spanish bank.

Bove said the FDIC will likely levy special assessments against banks in the fourth quarter of this year and second quarter of 2010.

He said these assessments could total $11 billion in 2010, on top of the same amount of regular assessments. “FDIC premiums could be 25 percent of the industry’s pretax income,” he wrote.

George Soros Calls G20: "Make or Break"

AIG, Barack Obama, Ben Bernanke, CDS, Europe, Fed, G20, George Soros, IMF, Larry Summers, Special Drawing Rights, Tim Geithner, Treasury, UK, World Financial Crisis
BBC NEWS
By Joe Lynam

071113_p00_soros

Billionaire investor Gorge Soros has said the G20 summit will be a “make or break” event for the world’s economy.

In a BBC interview, Mr Soros said the international financial system had collapsed because it was flawed and it had to be restructured.

Mr Soros say it may be the last chance to prevent a full-scale depression.

He said the G20 meeting had to come up with concrete solutions to help the developing world in particular, which had been been worst hit.

‘Depression’

Mr Soros warned that any attempt to pull economies out of recession had to be done co-operatively.

He said: “The G20 meeting is make or break because unless they do something for developing world there will be serious collapse in that part of the world.

“I’m using phrase depression because unless we take the right measures we’re liable to end up there.

If countries start doing it [engineering a new financial world order] bilaterally instead of multilaterally, the system will fall apart and we’ll end up in depression.”

He also said the rebuilding meant the previous economic system had to be scrapped.

“ The International financial system has collapsed and cannot be restored in its current form ”
George Soros

“I don’t think we’ll ever be back to where we came from. It should be recognised that the last 25 years were an aberration and we cannot go back there. We have to reconstruct the financial system from its foundations up.”

Mr Soros said regulators and the financial sector shared the blame for the meltdown, as they “participated in this crazy boom built on false premises on the belief that markets are self-regulating and should be left alone”.

Mr Soros also warned the UK economy was in a deep recession “which is going to be a lasting one”.

He added: “The International financial system has collapsed and cannot be restored in its current form. It will have to be restructured because it was flawed and collapsed under its own weight.”

In May last year, Mr Soros was interviewed by the BBC’s business editor Robert Peston and said he was worried about the US and UK’s ability to deal with the downturn because of their reliance on credit.

Mr Soros urged wealthy nations to give their allocations of the IMF’s internal currency, called Special Drawing Rights, to poorer ones because developing countries were not in a position to bail out their own failing banks.

George Soros famously made his name – and $1bn – when he bet that sterling would have to withdraw from the European Exchange Rate Mechanism in 1992. He’s also said to have accurately predicted and profited from the Asian financial crisis in 1997.

The 78-year-old Hungarian is one of the largest aid donors in Africa, having donated around $6bn to his favourite causes.