Banking On A Holiday

By MICHAEL GRAY

Guaranty Bank of Texas became the second largest bank to fail this year and the 10th largest in history.

So the past two weeks we have seen two banks, which are in the Top Ten Bank failures — Colonial Bank was sixth largest to close and opened under TARP-aided BB&T.

Guaranty will cost the FDIC $3 billion and was sold to BBVA Compass, the US arm of Banco Bilbao Vizcaya, Spain’s second-largest bank. In addition, the FDIC agreed to share losses with BBVA on $11 billion in Guaranty Bank’s loans.

This is the first time a foreign bank has purchased a failed US banking institution.

Guaranty’s failure, along with those of three small banks in Georgia and Alabama Friday, brought to 81 the number of US bank failures this year, with 17 failures just in August.

We see a growing number of bank failures as the year goes on and analysts are looking for a total of 300 by mid 2010. Although the numbers of closings does not rival the 550+ closings during the S&L crisis in the early ’80s, the size of the failures is far larger.

For this reason, as well as the lack of liquidity for the troubled institutions is why I still see a bank holiday coming this autumn to shake out some larger banking firms that cannot be sold and re-opened over a weekend.

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

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