The term “banking crisis” has been applied to the current state of the nation’s biggest banks, which have been reporting losses in the billions for the past several quarters, including Wachovia’s announcement today that it lost $9 billion and will shed thousands more jobs.
But is it really a banking crisis when other, albeit smaller, banks are reporting second quarter profits?
Take Commerce Bank, for example. Last week it said profits increased in the second quarter by nearly 3 percent.
And today UMB Bank said it saw its profits increase 18 percent over the prior year’s quarter.
So I ask, is it really a crisis?
Or are the woes of the nation’s biggest banks being broadly applied to the entire industry?
3 Comments
It appears that the “Capitol Federal”s of the banking world will do fine. These are the ones who stayed dull and boring – taking in deposits, hosting my checking accounts and credit cards, making dull boring conventional home mortgages to ordinary working people.
In many ways this is a re-run of the S&L debacle a couple of decades ago. The ones who stayed true to their roots and mission (dull and boring) thrived. The ones who got ‘modern and fancy’ failed.
Hey bth,
I agree with you, but please correct me if I’m wrong. The “modern and fancy” lenders became that way when Congress and the president loosened loan guidelines, basically giving the banks license to steal. From my understanding this (Congress) was exactly what caused the S&L crisis with one major difference: the S&L crisis was not FDIC guaranteed and most investors were crushed.
With McCain’s Keating 5 background (his self proclaimed biggest political mistake) he should have been screaming from the top of his lungs.
The whole thing makes me sick.
I think that is part of it. Also, as they became more sophisticated with creating an alphabet soup of derivitives they could hide the risks – for a while.
You are right about McCain and the Keating 5 – I would add that with Bush’s brother Neil involved with Silverado that GWB should also have been aware.
The difference you note wasn’t really there – S&Ls had FSLIC. Investors got hit; not depositors. As it whould be today. Note that shareholders of IndyMac came out empty-handed.
Another red flag – super-fast growth. I worked in Pasadena back in the 70s – never heard of IndyMac. But they balooned into a rather big bank. And on what?