Warren Buffett said more failures are coming, its inevitable
Warren Buffett said the current recession will continue for several months and it’s likely more banks will fail.
That prognosis has been reiterated by many of the leading economists in recent weeks. It all but guarantees more pain for the already-suffering finance world and particularly for banks heavily invested in mortgages. IndyMac in California folded in July 2008, which caused panic among its bank customers who lined up outside its various branches for days trying to withdraw their money. Which financial institution will be the next to fail is the question everyone’s asking. Mortgage finance companies Fannie Mae and Freddie Mac have grabbed headlines this week as they struggle to keep afloat. Both companies had to be propped up by the federal government. Chicago, which is one of the most bank-saturated cities in the country, is no stranger to troubled banks. In fact, the city was host to the largest bank failure on record. In 1984, the Continental Illinois National Bank & Trust Co. suffered a bank run and in just a few short months lost all of its $40 billion in assets. The most updated numbers available from the Federal Reserve state that as of June 20, 2007 Illinois was home to 592 banks with an average of $579 million in assets. That is 0.46 banks per 10,000 residents.
In the wake of the IndyMac failure, Sheila Bair (chairman of the Federal Deposit Insurance Corp.) has urged calm by saying she doesn’t anticipate bank failures will reach the level of the 3,000 banks and thrifts that failed in the late 1980s and early 1990s. That more failures are coming, however, is inevitable. Whether a Chicago bank will among those failures remains to be seen.
That prognosis has been reiterated by many of the leading economists in recent weeks. It all but guarantees more pain for the already-suffering finance world and particularly for banks heavily invested in mortgages. IndyMac in California folded in July 2008, which caused panic among its bank customers who lined up outside its various branches for days trying to withdraw their money. Which financial institution will be the next to fail is the question everyone’s asking. Mortgage finance companies Fannie Mae and Freddie Mac have grabbed headlines this week as they struggle to keep afloat. Both companies had to be propped up by the federal government. Chicago, which is one of the most bank-saturated cities in the country, is no stranger to troubled banks. In fact, the city was host to the largest bank failure on record. In 1984, the Continental Illinois National Bank & Trust Co. suffered a bank run and in just a few short months lost all of its $40 billion in assets. The most updated numbers available from the Federal Reserve state that as of June 20, 2007 Illinois was home to 592 banks with an average of $579 million in assets. That is 0.46 banks per 10,000 residents.
In the wake of the IndyMac failure, Sheila Bair (chairman of the Federal Deposit Insurance Corp.) has urged calm by saying she doesn’t anticipate bank failures will reach the level of the 3,000 banks and thrifts that failed in the late 1980s and early 1990s. That more failures are coming, however, is inevitable. Whether a Chicago bank will among those failures remains to be seen.
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