Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at intelligent and rational individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

"Observe that the 'haves' are those who have freedom, and that it is freedom that the 'have-nots' have not." Ayn Rand

"The virtue involved in helping those one loves is not 'selflessness' or 'sacrifice', but integrity." Ayn Rand

23 May 2010

Tracking U.S. Bank Failures

The count on U.S. bank failures for the years 2007, when much of the rest of the world was already beginning the current recession, was only three.  The 25 bank failures of 2008, when the U.S. was finally dragged into the recession, and those of 2009 (140 failures) and 2010 are given below.  Remember, the recession was started by a spike in oil prices in early 2007.  This chart plots the cumulative number of bank failures from the start of the year.  This gives one a sense of the relative failure rate for each year.  

As we can see, there is no evidence that hope and change as practiced by Obama and his cohorts in the Democrat Congress has had any salutary effect on failures in the banking industry.  Indeed, the Obama effect appears to be a great worsening of bank failures with all the attendant human misery.  Of course, Obama claims this is because Bush and the Republicans did not regulate the mortgage loan industry and the financial industry enough in general.  I have pointed out that the greater part of the problem has been that government has repeatedly pushed financial institutions very hard to make sub-prime loans to people who could not afford the homes they were buying and that local governments had often caused those homes to cost much more than they should.  The argument for too much government regulation is much stronger than that for too little.  These bad government practices were most strongly supported by the Democrats, including Obama when he was a Senator and a state senator.  The Democrats have controlled Congress, both the House and the Senate, since 2006 and their leadership preceded the crisis and continues even as the crisis has accelerated as seen by the increased number of bank failures in 2009 and then even more so in 2010.

The biggest bank failure in U.S. history, and in the world, was the Indymac Bank, which started as the Countrywide Mortgage Investment company.  It failed in July of 2008.  The only other banks that make the list of the top 20 bank failures in the world that have failed since the oil spike in early 2007 are the Netbank of Georgia in September 2007 at the 8th largest and the Sachsen LB of Germany which was the 9th largest failure in December 2007.  In each of these 3 cases, governments helped to transfer ownership of the bank to a new bank owner.  The total cost to the FDIC of the bank failures in 2009 was more than $30 billion.

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