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Thursday, February 26, 2009

FDIC List of Banks in Danger of Failure Soars 47%

Today the chairwoman of the FDIC, Sheila Bair, said the "Problem List" of troubled banks currently includes 252 banks with assets of $159B. This is up 47% from the third quarter of 2008 when the list stood at 171 banks.

She said this is one of the most difficult periods in the FDIC's 75 year history of operation.

In 2008 there were 292 bank mergers, 25 bank failures, 5 FDIC "assistance transactions." The 25 bank failures was the largest number since 1993.

There are now a total of 8,305 FDIC insured banks and savings and loans.

The banking industry lost $26.2 Billion in the fourth quarter of 2008. Worst since 1990.

Full year net income was down 84% to $16.1B, also the lowest since 1990.

FDIC reserve for bank failures fell by $16B and now stands at $19B.

The FDIC may ask for a special assessment on the industry banks to recharge their reserves.

The good news was Domestic Deposits Increased by 3.8 Percent
"Public confidence in the banking system and deposit insurance is demonstrated by the increase in domestic deposits during the fourth quarter," FDIC Chairman Sheila Bair said. "Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times."
Problem List: The FDIC does not make its list of member institutions in danger of failing public because it does not want to contribute to a "run on the bank" by concerned depositors. One indication a bank may be on the list is they pay very high CD rates in an attempt to attract capital. Richard (Dick) Bove of Landenburg Thalmann has a methodology for estimating what banks are in trouble.
See Dick Bove's List of Banks In Danger of Failing
IndyMac Bankcorp was at the top of Bove's list before it failed based on non performing assets as a percentage of equity.

The top rates for CDs this week are at Pentagon Federal Credit Union (fondly known as PenFed CU) for 5 and 7-year certificates of deposit that currently pay 4.39% APY.

For shorter term, Corus Bank has a 1-year CD with a 2.93% annual percentage rate.

For online savings, GMAC Bank is paying 2.75% on any deposit over $500.

With rates so low, banks will try to sell you their annuity products. Make sure you read our article "Beware of Annuities."

The table below shows the best CD rates for other terms. If that table is hard to read, then try Very Best CD Rates.

"Highest CD Rate Survey + Current US Treasury Rates"
Rate (APY)
(Click link for Full Rate Sheets)
Daily Savings
Vanguard Prime Money Market Fund
Tax Exempt
2/24/09 0.77%
Vanguard Tax Exempt Money Market Fund
Online Savings 2/24/09 2.75%
GMAC Bank & 2.25% @ HSBC Bank
3-Month Treasury
2/24/09 0.30%
US Treasury Rates at a glance
6 Months 2/24/09 2.60%
6-Month Treasury
US Treasury Rates at a glance
9 Months 2/24/09 2.75%
1 Year
2/24/09 2.93%
Corus Bank 2.90% @ GMAC Bank
1 Year Treasury 2/24/09 0.70%
US Treasury Rates at a glance
18 Months 2/24/09 2.90%
Intervest Bank & UmbrellaBank
2 Years
2/24/09 3.00% UmbrellaBank & 2.95% @ GMAC Bank
2 Year Treasury 2/24/09 0.98%
US Treasury Rates at a glance
3 Years 2/24/09 3.40% Flagstar Bank
3-Yr Treasury
US Treasury Rates at a glance
4 Years
2/24/09 4.15% PenFed Credit Union
5 Years
2/24/09 4.39% Pentagon Federal CU
5 Yr Treasury
US Treasury Rates at a glance
7 Years 2/24/09 4.39% Pentagon Federal CU & 3.50% @ Discover Bank
10 Yr Treasury
2/24/09 2.80%
US Treasury Rates at a glance
10 Years 2/24/09 3.50%
Discover Bank
30 Yr Treasury 2/24/09 3.50%
US Treasury Rates at a glance

With rates so low, banks will try to sell you their annuity products. Make sure you read our article: Beware of Annuities

(FDIC Feb. 26, 2009 Press Release)

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