Wednesday, May 27, 2009
Rise in bank failures belies optimistic assessments about economy
All the happy talk about the economy coming from the White House these days could just be wishful thinking. The Federal Deposit Insurance Program, which protects U.S. bank deposits, said yesterday that 53 banks had been added to its list of financial institutions at risk of failure, bringing the total to 305 in the first quarter, according to the Washington Post. The FDIC also said 36 banks had already failed in 2009. That doesn't exactly comport with President Barak Obama's optimistic statement today that the economy was getting better with the help of his $787 billion stimulus package. "Americans have saved thousands by taking advantage of the tax credits for the purchase of a new home, a new fuel-efficient car, or energy-efficient cooling and heating systems, windows and insulation," Obama said in a speech at Nellis Air Force Base near Las Vegas. Obama said 95 percent of working families received tax cuts, unemployment benefits were extended and 44 million Social Security recipients got a $250 bonus from his stimulus bill, according to the Associated Press. But FDIC chairwoman Sheila Bair said at a news conference Wednesday that officials have run into problems implementing the Troubled Assets Relief Program, which was supposed to help the banking system recover by sponsoring purchases of "toxic assets" held by financial institutions. Those assets, which include ill-advised loans to millions of home buyers and unsafe "securities" held by financial institutions, are blamed for the collapse of the banking system last year. Bair said some banks are balking at revealing information required by the government to enter the TARP system, and some are objecting to rules being drafted by regulators to bar banks from repurchasing their own toxic assets at a discount under the program. But the FDIC also said the nation's banks made a profit of $7.6 billion in the first quarter after losing $36.9 billion loss in the fourth quarter of 2008. Banks earned $19.3 billion in the first quarter of 2008, the Post said.