Top 10 Banks that could fail in 2010

[Greg Gamble - Seattle Washington]

The overall message is that the FDIC is on pace to close 200 banks this year.

Sterling Financial is in the top 10 and is a Spokane WA based bank. The State of WA will most likely continue to see a few others go down as well. See attached link.

http://investinganswers.com/node/1199?TP=606

[Greg Gamble - Seattle Washington]

Jessica,
Well nothing personal, I was never a big fan of Greenspan. He kind of opened the doors too a good part of this economic mess we are facing. But do agree there needs to be regulations in place not only with the banking industry, but also with the securities as well. When Wall Street packaged loans as securities and had them triple A rated, there was no regulation, no over sight and the process and system stunk from the head on down.

I dont know who to trust or look to for advice. However every financial institution and governmental agency has over reacted with a "knee jerk" approach and over tightened the loan process. There should be regulation, but we do need access to money and home loans. We went for no income qualifiers, FNMA approving condo projects with massive commercial components, allowing excessive non owner occupant ratios, all of which went away from the industry norm for years and years. FNMA and Freddie Mac all left their standard platforms behind in order to capture more loans. I dont know what the answers are, but we can't continue if we don't loosen up lending. That doesn't mean to do so recklessly, but there has to be a happy medium.

Thanks for the links Jessica and the links you provided. I think we all need to contact our state representatives, NAR, Master Builders, etc, etc. And let them know how we feel. We will have many more banks fall. And we will all loose some level of service through the process.

[Greg Gamble - Seattle Washington]

Steve
I am concerned as well about only a few banking institutions being the ones who will survive. We are loosing community banks with broad coverage and community friendly approach. But then Union Bank rolls in and takes over on Frontier. This is not the same type of bank, nor do they offer residential loans for the community, they are a residential mega lender. 5 million and up. Union bank is not going to do construction loans either. If they do, it is not for your typical 50 home sub division. So how do they offer anyone here any benefits. They will not open up the market, and from what I have read and heard about from the inside, there is not any interest in being a part of the community. It doesn't seem like a good fit and many residential buyers and builder (down the road) are loosing options on who will lend. I will have to see if I can find Jesse's blog. But there is a absolute reduction in consumer choices as time rolls on. I think areas of the country like yours that has been heavily involved in this mortgage meltdown for the past three years does offer some insights into what is going on and the upcoming trends. Thanks for the insights Steve

[Jessica Klein RDCPro]

This is a big issue, much bigger than any one of us, any one state or any one community it is all too interconeected at this point you have to look at BIG picture and we have to re consider how we look at REGULATION and oversight, a big issue for our country TODAY. So who do we look to for the know how to lead us out of it?

I like Brooksley Born. I admit, I used to think Greenspan was really smart, but our ever expanding financial system and increasing leverage and reselling and swapping to ??*reduce risk exposure* ??? it was just too good to be true. We have to get real now and look seriously and all the over leveraged areas of our banking and related industries. It is going to be a long road out of this mess, and yes unfortunatly there will be more banks that will likely fail, more than 10.

http://news.firedoglake.com/2010/04/07/brooksley-born-excoriates-al...

http://www.pbs.org/wgbh/pages/frontline/warning/interviews/born.html

[Steve Adkins]

I live in Georgia, the bank closure capital of the US! We saw FDIC come in to GA 3 years ago, change a bunch of rules and then started shutting down banks. Like your area Greg, many of the banks were heavy into new construction. But they were still surviving and doing business until the "inspectors" came to town. These inspectors were from other parts of the Country where speculation building for new construction did not happen. This forced a lot of our builders into bankruptcy and closed the banks also.

I really believe that there is a master plan somewhere to create one National Bank and all the other community banks will just go away or be closed down by regulators. I think Jesse even wrote a blog about this months ago.

[Greg Gamble - Seattle Washington]

Jessica,
Thanks for the comments. Many of the banks that are doomed or have failed in Seattle (exception being WA MU) are smaller local banks. I am tired of bailing these guys out as well. And quite honestly we have 26 banks here being targeted by the FDIC. And many will go under because they were so heavily leveraged in new construction loans and simply didn't use any common sense. The ratios of construction loans to overall bank value and equity was seriously out of whack.

Seattle banks were still lending on new construction projects as late as mid 2007 because many thought we would never be hit like the rest of the country. But we as a state continue down the same path every ten to 15 years. Last to leave the party and the last to arrive.

As for saving every dollar we can, I couldnt agree more. We have had 3 sales in our neighborhood. The first two sales were not a 'troubled" or distressed sales. But the agents that listed these homes had them discounted like they were. The balance of the neighborhood all pays the price for it. They both could have sold for 50K each more and in the same time frame. (2 weeks or less). But then we had a short sale that was discounted by 150K and it has taken the wind out of neighborhood. There are close to 10 neighbors who owe more than their loan value and non of these neighbors were reckless when they purchased. They all have their jobs, make their payments. But it is a sad commentary and has ruined our neighborhood for many. When you essentially lower the base line by 200K it puts everyone on shakier ground.

Now it has become common place where the majority of buyers here, look at every home like a distressed sale. The buyers agents are insane and you couldnt lower the prices enough get a full priced offer. It takes a different strategy when marketing and positioning a property. I will discuss that next week on a ten unit town home bank owned project where we increased prices (60 days ago), created a fear of loss and were able to move prices up. Took us 22 offers to get 10, but it worked and the bank and the neighborhood were happy.

Thanks for commenting Jessica. I appreciate it.

[Jessica Klein RDCPro]

article states "U.S. government has decided there will be no more bank failures as large as Lehman Brothers" What???? I do not think the governement can just *decide* this.

Many industry people have said there is no more "TOO BIG to FAIL” there cannot be more AIG mass bailout plans. I am not sure why the article is even focusing on a TOP 10 this year?

Hopefully US private sector will continue to be able purchase assets direct or out of receivership as these banks go down, there are more than 10 to be concerned about. And, as the assets move around, on the non performing loans that is where we REOPRO come in. We have to keep working so hard to sell (or modify & restructure loans) these individual homes for top dollar, quickly and effectively to minimize the loss severity.

Each dollar we save on loss severity is a dollar we save in VALUE for our communities hit so hard by this. I feel really strongly about this and some days it is what keeps me going in this profession. Anyone who really lives and works in the trenches of this crisis I think you get it. I am personally envious of people living where the grass is a little greener , and the sfr occupancy rates are higher, and homeowner LTV rates are closer to 110% or less…. ahhh that would be paradise these days. I think it is so easy for people to become jaded and pick over the losses as a bargain bin for their own personal gain. YES, and YES again there are opportunities for buyers, but let’s keep an eye on the big picture too. Treat the assets and the people forced out of them with respect; this is the best way to rebuild communities.

The size of the bank is of course important, and whenever it hits close to home people tend to pay more attention. this is the site link I tend to watch for my updates: http://www.fdic.gov/bank/individual/failed/banklist.html