May 27, 2012
Looking at this week’s new charts, we see a new 41 month low for the FDIC DIF (deposit insurance fund) cost. The cost paid by the FDIC this past month of May was only $19.7 million dollars.
Incredible …… just incredible.
This follows a two year downward trend where the FDIC DIF cost has plunged. So far the DIF cost incurred this year has been minimal. At the current rate of bank failures and DIF cost, we could very well see the year end DIF total below 4 billion dollars.
Did you know that 23 of the past 24 bank failures this year have been either a Mississippi river state, or located east of that river. There has been one west coast bank failure this year. On April 27th a small California bank was closed by the FDIC.
So what can we learn from the past two years?
· Smaller banks are the problem. Not one medium or large bank has been closed by the FDIC in 2 years.
· Banks located in states on or east of the Mississippi are more poorly run then the banks west of the mighty river. Also more severe economic conditions are present east of the Mississippi River.
· The too big to fail bar has been lowered.
The current bank failure ratio of 1:24 is pretty easy to see on a map. Was this caused by policy considerations or economic factors? The mentioned ratio presents a large gap geographically in bank failures. I really don’t know the reason why there’s such a gap from east to west. It just raises my concern and suspicion levels.
To review the new charts please click on this link or the link under the Economic Charts/Data pages to the right side of this page.