What will 2010 be like for banks?
As credit-card delinquencies continue to rise banks, like Bank of America, need cash as credit card losses continue to build. But not to worry because H.R. 4173, a House bill introduced by Barney Frank, will support the biggest banks with $4 Trillion gift, from the taxpayer.
Who saved the economy? Ben Bernanke or the taxpayer? More importantly, was the economy saved?
A few days ago Time Magazine put Bernanke on its cover and announced that he was the person of the year for 2009. But what about the taxpayer? Should not the taxpayer be the person of the year? Because, after all, it is the taxpayer who will pay for Bernanke's trillion 'bailout' dollars.
The sad part about this is that another larger, deeper economic contraction is coming. What will Bernanke do then?
Courtesy of Computational Legal Studies: "The movie [above] shows the location of bank failures, beginning in 2008 and concluding with the three failed banks from Friday, December 11, 2009. Each green circle corresponds to a bank failure, and the size of each circle corresponds logarithmically to the FDIC’s estimated cost for the Depository Insurance Fund, as stated in the FDIC press releases. For failures with joint press releases, such as the 9 banks that failed on October 30th, the circles are sized in proportion to their relative total deposits."
We think the deflationary spiral cannot be stopped.
Results from Google's Keyword Tool for how many times the words inflation and deflation are searched show that the majority of the global population is thinking inflation and not deflation:
The difference is staggering- 2,240,000 searches for inflation vs. only 165,000 for deflation.
Although deflation is not on people's minds at the moment it will not be long before it is. As the continued deflationary period marches on again (but this time at a faster rate) all hopes of a recovery will be washed away and the economy will continue to deteriorate.
There is currently about $550 billion in outstanding commercial real estate loans and according to Kenneth Rosen, who heads the University of California’s Fisher Center for Real Estate and Urban Economics in Berkeley, these loans are "going badly at a rapid rate."
How rapid? We don't know but we think the next big thing to be picked up by the main stream media will be the commercial real estate collapse that has been invisibly crashing in the background while claims were made that the recession was over and economic recovery was up ahead.
Please also consider the following from Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations:
"The 54 percent overall decrease in commercial/multifamily lending activity during the third quarter was driven by year over year decreases in [mortgage] originations for all property types. When compared to the third quarter of 2008, the decrease included a 62 percent decrease in loans for retail properties, a 59 percent decrease in loans for health care properties, a 58 percent decrease in loans for industrial properties, a 56 percent decrease in loans for office properties, a 46 percent decrease in hotel property loans, and a 40 percent decrease in multifamily property loans."
This is an across the board collapse of commercial property loans which is a reflection of an across the board penetration of deflation.
(Headline source: Real Capital Analytics.)
The failed bank list on the Federal Deposit Insurance Corp.'s web site is long, very long. If 2008 was the year of the financial crash what is 2009 with 123 bank failures, and still counting?
No wonder the Federal Deposit Insurance Corp has to replenish its fund to cover the losses- from the banks that are still in business.