In the largest weekly collection of bank failure so far this year, the FDIC took control of seven banks this past Friday evening, bringing the 2010 year to date total of failed banks to 37. The YTD total already far exceeds the 2008 annual total of 25 failed banks and the pace of the 2010 closures is well ahead of last year’s pace, when a total of 140 banks closed by year end.
The closures this past Friday night included three more banks in Georgia, bringing the 2010 year to date total in that state to five, and the total since January 1, 2008 to 35, by far the highest number for any state during that period.
The only other state with as many as 2010 closures as Georgia is Florida, which also has five failed banks in 2010. Since January 1, 2008, Florida has had a total of 21 failed banks, which ranks the state fourth overall during that period, behind Georgia, Illinois (25), and California (24). During 2010, Illinois has three failed banks and California has two.
Two other states that have significant numbers of 2010 bank closures are Minnesota and Washington State. Minnesota has four 2010 YTD bank failures and eleven total since January 1, 2008, Washington has four failed banks this year and seven total since January 1, 2008.
Overall 17 states have had at least one bank failure in 2010. Although there is a perceptible concentration of bank failures in Georgia and Florida, the 2010 failed banks have been widely dispersed geographically.
This overall geographic spread has characterized the current wave of bank failures since its beginning. Indeed, since January 1, 2008, 36 different states have each had at least one failed bank. There has, however, been some concentration in certain states, particularly Georgia, Illinois, California and Florida.
The pace of bank closures so far in 2010 is well ahead of the pace during 2009. At this same point a year ago, there had only been 20 failed banks, compare to 37 so far this year. The 37th bank closure last year did not take place until June 5, 2009.
The pace of bank failures definitely has quickened in recent months. During the 27 month period since January 1, 2008, here have been 202 bank closures. However, of those 202, 132 (or roughly two-thirds) have failed just in the nine months since July 1, 2009.
Although there has been no single month that has come close to the July 2009 total of 24 failed banks, the 15 so far this month is tied with the third highest monthly total since the early 90’s.
The 2010 bank closures continue to be concentrated among the smaller banks. 29 of the 37 bank failures so far this year have involved institutions with assets under $1 billion. (Of course, there are many more institutions with assets under $1 billion, so in that sense this distribution may not be surprising.)
The pace of bank failures has remained at elevated levels over the past nine months. Given that in its last Quarterly Banking Profile, the FDIC identified 702 banks as "problem institutions" as of December 31, 2009, the heightened pace of bank failures seems likely to continue for some time to come.
But while the number of failed banks continues to grow, there has not yet been an equivalent wave of failed bank litigation. Indeed, at least one lawsuit brought by a failed bank’s investors has been withdrawn.
As I noted in an earlier post (here), in December 2009, nearly 60 investors in New Frontier Bank had brought suit against certain former directors and officers of the failed bank. However, the Greeley (Colo.) Tribune reported on March 17, 2010 (here), that the investors are withdrawing their lawsuit out of concerns about insurance coverage and out of recognition of the FDIC’s priority rights as receiver to the bank’s claims. Based on the article, I am no entirely sure what the investors’ insurance coverage concerns are, but I have previously written about the FDIC’s priority rights here.
The New Frontier Bank’s investors’ expectation is that the FDIC will pursue claims against the former directors and officers of that bank. Indeed, the expectation in general has been that the FDIC will pursue these kinds of claims with respect to many of the banks that have failed during the current round of bank closures. Certainly during the S&L crisis, the FDIC pursued claims against former directors and officers of roughly a quarter of the banks that failed (as detailed here). There no reason to assume that the FDIC will not be similarly litigious this time around. But at least so far lawsuits brought by the FDIC as receiver against the directors and officers of failed banks have yet to materialize in significant number.
Travel Hell: On Saturday March 13, 2010, I was scheduled to catch a flight from Cleveland to Newark at 5:55 pm, where I was to catch an 8:45 pm flight to London. At around 3 pm on Saturday, I received an email from Continental Airlines advising me that my flight to Newark was delayed due to weather and that it would not arrive in Newark until 8:30 pm.
Because of concern that I would miss my connection in Newark, I called Continental. They advised me that the 2:00 pm flight from Cleveland to Newark was also delayed and had not yet left Cleveland, and perhaps I could catch that flight and still make my connection.
I sprinted to the airport and managed to get a seat on the delayed 2:00 pm flight. However, as the afternoon turned into evening, all of the Newark bound flights were pushed back further and further. (There were huge storms in the New York area that night.) Eventually, the delayed flights were scheduled to leave Cleveland after the scheduled departure time of the London flight. I threw in the towel and booked myself on the first flight to Newark in the morning, and then I went home.
The 8:45 am flight from Newark to London, meanwhile, left Newark right on time. I suspect it was the only flight that entire weekend that was on schedule.
The next morning, I was up at 4:00 am (which felt like 3:00, due to the daylight savings time change), and I went to the Cleveland airport to start all over again. My 6:25 am flight to Newark was also delayed somewhat, but I made it to Newark by about 8:30 am, in plenty of time for the 10:00 am connection to London.
However, the airplane that was to be used for the London flight had been delayed coming out of Lima, Peru the prior evening, and it did not actually arrive in London until about 11:30 am.
After the plane from Peru arrived, there was a long delay, and finally about 12:45 pm, there was an announcement that while en route from Lima, the plane had been hit by lightening, and it was being taken out of service. A new plane would have to be brought to the gate.
We finally started to board the new plane at around 2:00 pm. The plane was entirely full and the boarding process took a long time. Finally, after everyone had boarded, the captain came on the P.A. and announced that the crew had timed out, and there would have to be a delay while the crew rested. So – everyone off the plane. The new departure time announced was 12:45 am.
After several lonely lifetimes haunting the concourse at Newark, we finally boarded the plane at 2:00 am. After everyone had boarded, the captain came on the P.A. and announced that the plane had a flat tire, and so we would have to get a new plane. So—everyone off the plane.
After everyone was off the plane, it was discovered that everyone’s boarding passes had expired. So everyone had to get new boarding passes.
After everyone had their new boarding passes, we boarded yet another new plane at around 4 am. Astonishingly, at about 4:45 am, the plane finally departed.
About three hours later, while the plane was approximately over the middle of the Atlantic Ocean, a flight attendant came on the P.A. and said, "If there is a doctor on the plane, could you please ring your flight attendant call button." About ten minutes later, the flight attendant came back on the P.A. again and said, "If there is anyone on the plane who is qualified to read vital signs, could you please ring your flight attendant call button."
For the rest of the flight, the flight attendants rushed back and forth with worried faces. When we finally reached the gate at Heathrow, a crew of EMTs boarded the plane and they removed a very grave looking older man from the plane.
After I took a taxi into London, I finally arrived at my hotel around 5 pm local time on Monday – about 46 hours after I first left my house on Saturday. I had missed all of my Monday meetings.
I left my hotel to return home at about 5 am on Wednesday morning, about 36 hours after I had finally arrived. In other words, I spent ten hours less in London than I had spent trying to get there.
On the other hand, though it was pretty bad for me, it was worse for the guy they carried off the plane on stretcher.
Service Announcement: Readers may have experienced a variety of different problems with the email notifications for this blog. There have been duplicate notifications, late notifications, missing notifications — and the problems have been getting worse.
As a result of these problems, I will be switching to a different service provider for delivery of email notifications. I am still not 100% sure when the switchover will take place, but probably some time in the next few days.
When the change does occur, every current email subscriber will receive an email requiring them to confirm their subscription. This is important – if you wish to continue to receive email notifications, you will need to reconfirm in order to reactive your subscription, so that you will receive email notifications from the new service provider.
I apologize for any inconvenience this change may cause, but in light of the recurring problems with my existing email notification service, I had to take corrective action. Please let me know if you have any difficulties with the change.