Info!! Banking On Bailouts: How Many Indymacs Are Out There?

In what has been billed the third-largest banking concern failure on record, IndyMac Bank has been taken over past times federal regulators. According to a weekend Wall St. Journal story, the bank's collapse volition cost the Federal Deposit Insurance Corp. betwixt $4 billion in addition to $8 billion. That would exhaust over 10% of the entire deposit insurance fund of the FDIC.

That eye-opening statistic led me to wonder how many to a greater extent than IndyMac banks powerfulness last lurking inwards the wings. We had around alarm to the gravity of IndyMac's province of affairs exactly past times next its stock price, every bit shares moved from over $10 early on inwards the yr to nether $2 past times May. Perhaps year-to-date stock surgery powerfulness alarm us to other candidates for seizure--and farther challenges for the FDIC.

With the handle of information from the splendid Barchart site, I tracked the year-to-date surgery of every publicly traded banking concern in addition to savings in addition to loan institution. I especially focused on 2 groups of companies: those that conduct keep enjoyed a ascent stock marketplace pose surgery year-to-date in addition to those that conduct keep severely underperformed the market. I measured this latter grouping inwards 2 ways: those that autumn into the lowest 20% of year-to-date performers across all NYSE, NASDAQ, in addition to ASE issues in addition to those that autumn into the lowest 10%. Mr. Market is alerting us to the possibility of an IndyMac-like demise for this latter group, the bulk of which are downwardly to a greater extent than than 60% on the year.

Interestingly, I constitute 33 banks in addition to savings in addition to loan institutions that are upward year-to-date inwards their stock marketplace pose performance. They are outperforming the wide stock market, in addition to they are trouncing their sector peers. Many are yielding 3% or to a greater extent than in addition to conduct keep enjoyed enterprise earnings growth. I took it upon myself to expect upward a few annual reports for these fiscal institutions. All seem to conduct keep conservative lending practices, amongst no subprime residential loans in addition to no major occupation loans to overextended existent estate developers.

Many of these high performing banks are located inwards decidedly unsexy areas where in that location was no existent estate boom. Two of the banks, for example, are located inwards my onetime hometowns of Syracuse in addition to Ithaca, NY. More than 10 of the banks were located inwards the Northeast; exclusively ane was inwards the West.

The banking concern in addition to savings in addition to loan stocks falling into the bottom 20% of all marketplace pose performers were far to a greater extent than numerous: in that location were 113 inwards all. Of these, 45 are severe laggards, falling into the bottom 10% of marketplace pose performers. Interestingly, close one-half of these are located inwards the West in addition to Southeast regions of the country: 2 of the hotter existent estate markets during the boom. And the large regional banks? Seven autumn into the underperforming category; 2 inwards the lowest group. None are upward on the year.

The housing crisis does non seem to last over in addition to nevertheless the marketplace pose is already warning us of at to the lowest degree 45 banks inwards straits potentially similar to IndyMac. Many to a greater extent than of the grouping of 113 may bring together that listing every bit the housing province of affairs unfolds, particularly amid smaller banks. Meanwhile, I respect on the Bankrate site that many of the banks offering the juiciest CD rates are those on my listing of stock marketplace pose handbasket cases. It's understandable that they want/need to heighten capital, but if the banks cannot fund those juicy returns, it volition exclusively last a larger telephone phone on FDIC funds. That is a demand that the FDIC is ill-prepared to meet, given its historically depression reserve ratio, raising the unpleasant prospect of bailing out the regulators.
.