U.S. banks are facing an avalanche of 1800 bank failures

If last February entities at risk of bankruptcy in the U.S. amounted to 500, recent reports from independent analysts raise this figure to about 1,800 banks. 20% of the U.S. financial system.

According to official data, although not published, the Deposit Guarantee Fund of the USA (FDIC) about 500 banks are at risk. However, this figure falls short in light of recent reports from independent analysts.

Thus, according to a stress test performed by 940 financial institutions The Washington Post local and regional banks are facing losses of close to 200,000 million dollars if the U.S. recession continues. As a result, some 600 entities to be a capital injection. In fact, the treasury secretary, Timothy Geithner, before this, now intends to expand its financial rescue plan (TARP) to such entities. This figure shows that the insolvency of the financial system suffers from the first world power.

This figure is in addition to the 600,000 million loss, according to the Treasury will face the 19 largest banks in the country, after a stress test (stress test), whose results are not believed anyone else, the Treasury estimated a financial hole 74,000 million. Not even the former chairman of the U.S. Federal Reserve, Alan Greenspan, believing that the capital needs of the large banks will be much higher, reports Bloomberg .

800,000 million bank losses

In total, according to these data, U.S. banks face losses close to 800,000 million dollars in the coming months due to deterioration of assets and the avalanche of mortgage defaults, corporate and consumer credit.

Indeed, on Thursday, the financial authorities were forced to intervene a bank BankUnited FSB, based in Florida, considering that it lacked sufficient capital to continue operating. The intervention of the entity that manages 13,000 million dollars in assets, represents the largest bank failure in U.S. so far this year. According to a release the FDIC operation will cost 4900 million dollars.

Already 59 banks have gone bankrupt in the U.S.

The biggest event of the bankruptcy of a commercial bank in American history was in 2008 for the once-leading savings bank Washington Mutual, which had a total balance of more than 300,000 million dollars. In this case, there are already 59 banks that have gone bankrupt in the U.S. only since 2008 -34 so far this year. However, the FDIC expects further bankruptcies.

Since its funds to guarantee customers' deposits are almost exhausted, the U.S. Treasury has granted a credit to this agency temporary and extraordinary value of 500,000 million dollars to 2010-the project had been approved by the Senate -. That is, the U.S. government has come to the rescue of the FDIC to guarantee the deposits of customers, thus avoiding the dreaded bank run.

Thus, if the FDIC's internal data showed some 500 banks at risk of bankruptcy last February, at present, according to The Washington Post about 600 banks in 960 examines an extra injection of public money. It is worth remembering that the latest financial rescue plan submitted by Geithner, close to a billion dollars, allowing the participation of private capital, but the trick is that it is the state guarantees and assumes all risk in such transactions with the taxpayers' money.

The FDIC has no money

Nevertheless, a more extensive analysis paints an even worse scenario. In August 2008, prior to the bankruptcy of Lehman Brothers, Liberty Digital picked an alarming warning launched by the then president of Fortis Bank, Maurice Lippens, which ensured that bankruptcies could affect a total of 6,000 banks in the U.S. and that their muscle was insufficient liquidity to weather the storm credit.

It is recalled that the number of financial institutions operating under the guarantee of the FDIC is about 8,000. That is, Lippens said that 75% of the system was insolvent.

Your ad ran like wildfire and, despite the reactions of disbelief a little later in October, governments around the world were forced to intervene to prevent the total collapse of the financial system following the bankruptcy of Lehman. Since then, financial bailouts have been happening, but the bank insolvency is still present.

1800 banks in danger of bankruptcy

Thus, last April, Martin D. Weiss, president of the financial services company Weiss Research -independent analyst firm, stated that according to their estimates, some 1.800 U.S. banks are at risk of bankruptcy and should be increased to attract more capital to survive the crisis. Ie, 20% of the U.S. financial system is insolvent.

Its report, based on the bank balances of the last quarter of 2008, warns that, beyond the big banks in trouble, hundreds of local and regional authorities are on the verge of bankruptcy.

Under the title, Dangerous Unintended Consequences: How Banking Bailouts, Buyouts and Nationalizations Can Only Prolong America `s Second Great Depression and weak Any Subsequent Recovery , Weiss warning that the U.S. government underestimated the risk of insolvency that is facing the banking and the real extent of the debt crisis, while overestimate their ability to save entities in bankruptcy without "serious consequences".

The FDIC estimates fall short. Officially, according to the FDIC, 252 entities are at risk of bankruptcy, with assets of 159,000 million dollars. Weiss, however, estimates that 1816 banks are at risk of bankruptcy, with assets amounting to 4.67 trillion dollars. And, based on data from the last quarter of 2008. This calculation exceeds even the total financial cost to the International Monetary Fund estimates for the entire banking world

Weiss notes in his report, dated March 19, that the strategy of "too big to fall" has failed. Instead they recommended that the Government abandon its utopian goal of saving all financial institutions; liquidate insolvent institutions, no matter their size, and provide a well-capitalized and prudently managed by the entities best positioned, by a strict regulation.

We must "change their priorities to avoid a" Second Great Depression in the U.S.. " Nevertheless, Weiss was optimistic after the U.S. state that can survive a banking crisis larger, or even another Great Depression provided you take the "right decision"
Weiss predicted the collapse of Bear Stearns 102 days before they occur, Lehman Brothers (182 before), Fannie Mae (8 years) and Citigroup (182 days before).