Banks, FDIC May Be Headed for Trouble

By Dave Skidmore, Ap | THE JOURNAL RECORD, October 1, 1989 | Go to article overview

Banks, FDIC May Be Headed for Trouble


Dave Skidmore, Ap, THE JOURNAL RECORD


WASHINGTON - Despite a string of record profits, hundreds of commercial banks and the government insurance fund that guarantees their deposits are far less healthy than they seem, analysts say.

The warnings are making members of Congress nervous just two months after they enacted a $50 billion, three-year bailout of the savings and loan industry.

Legislators remember all too well the reassurances they heard from regulators and industry executives while the S&L business was crumbling, and how quickly hints of trouble mushroomed into the most dire financial crisis since the Depression.

Two well-known banking economists, Robert E. Litan of the Brookings Institution, a liberal think tank, and R. Dan Brumbaugh Jr. of Stanford University, report that commercial banks, though better off as a whole than S&Ls, may be heading for trouble themselves.

Litan, appearing before the Senate Banking Committee last week, warned that about two-thirds of the reserves in the Federal Deposit Insurance Corp.'s bank fund will be needed for banks that are weak or already insolvent.

At the end of June, the FDIC's bank reserves totaled $14.5 billion. But Litan and Brumbaugh say their analysis of bank data through March shows that $9.5 billion of that is needed to cover losses at banks that are insolvent or close to it,leaving only a thin $5 billion layer of protection before taxpayers would be called on to bail out the fund.

A post-Depression record of 221 banks failed last year. So far this year, 167 have closed or required government assistance to stay open - 116 in Texas.

FDIC Chairman L. William Seidman says he expects failures for all of 1989 to be slightly below last year and to decline further in 1990.

However, a study by analyst William C. Ferguson of Irving, Texas, casts doubt on that. He said that 443 banks of 13,000 nationwide have been losing money consistently from 1987 through the first quarter of this year.

``In spite of the high reported earnings of the banking industry (overall), the picture is not as rosy as it seems,'' Ferguson said. ``If present earnings trends for these (443) banks continue, this group will run out of capital by late 1990 or early 1991.''

The banking industry disputes its critics.

``Skeptics make a living peddling a different tune,'' Nebraska banker C.G. Holthus, president-elect of the American Bankers Association, told a House subcommittee. ``We think they're exaggerating the problem. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Banks, FDIC May Be Headed for Trouble
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.