Weekends Aren't Fun At Bair House

By MICHAEL GRAY

So the FDIC changed the rules on who can buy a bank just in time to deepen the pool of potential buyers as the FDIC’s pool of funds available to bail out failed institutions became very shallow and the number of troubled banks grew.

Private equity may jump into the bank-buying pool with both feet at first, but I believe they will turn away very quickly after getting a taste of working under Uncle Sam. Anyone remember the changes to TARP recipients?

The number of banks the FDIC says is at risk of failure reached a 15-year-high. The number of “problem banks” had risen from 305 to 416 in the second quarter. While it does not name the guilty, the banking regulator said total assets at risk had risen from $220B to $300B.

The FDIC says it has roughly $10.4B in its coffers. That number will not even cover this weekend’s closures probably. But Chair Bair says that she can go to her best friend Tim Geithner over a Treasury to get a raise in her allowance through the bond market and there’s also additional fee payments coming in from other banks very soon.

BANK HOLIDAY MATH

So let’s do some back of the envelope math to see how the bank holiday comes about.

Over the past two weekends we have had the sixth and 10th largest bank failures in history, with $25 billion and $14 billion of assets respectively for Colonial and Guaranty. Still, theses numbers pale in size compared to the Wall St. behemoths.

Bank of America Merrill Lynch: $2.3 trillion in assets at the end of the second quarter.

JPMorgan Chase: $2.1 trillion in assets at the end of the second quarter.

Citigroup: $1.8 trillion in assets at the end of the second quarter.

Wells Fargo: $1.3 trillion in assets at the end of the second quarter.

These asset totals don’t include over a half a trillion of dollars in off-balance sheet assets.

If market-to-market was ever reinstituted all these banks would fail. If one stumbles we have a bank holiday.

TRADING BUBBLE DEFINED

On Thursday, Citigroup, AIG, Fannie Mae and Freddie Mac accounted for 30 percent of the NYSE trading volume. If that does not point to a top, then I should hang up my cleats.

For more on Wall and Washington and the economy see: http://mgray12.wordpress.com

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