tag:blogger.com,1999:blog-3011727801882113130.post5638410540286471257..comments2023-07-02T09:28:04.887-04:00Comments on Alex Dalmady's Blog: Too Puny to SucceedUnknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-3011727801882113130.post-1461727948279567722010-03-17T07:07:10.678-04:002010-03-17T07:07:10.678-04:00"Of the 30 banks closed by the FDIC this year..."Of the 30 banks closed by the FDIC this year, 25 have total assets of less than $1 billion."<br /><br />If more than 90% of all banks but only 83% (25/30) of the failed ones are puny, it means their rate of failure is better than the big banks: 25/7340=0.34% for puny banks and 5/672=0.74% for big banks, more than twice! Ha, take that! :pDaniel Tellohttps://www.blogger.com/profile/18356162909901960817noreply@blogger.comtag:blogger.com,1999:blog-3011727801882113130.post-44135823664467453162010-03-15T16:49:34.863-04:002010-03-15T16:49:34.863-04:00Anon. thanks for reading and leaving your comments...Anon. thanks for reading and leaving your comments.<br /><br />I understand your points and agree with them mostly.<br /><br />However, you seem to be under the impression that there are no taxpayer or consumer consequences when a small or medium sized bank fails. That is not the case. Since the deposits at these institutions are insured, the FDIC must supply the difference between the recovery value of the bank's assets and the insured value of the deposits. That normally comes from the FDIC insurance fund, which is "funded" (lack of a better word), by premiums paid by the industry (and hence indirectly by the consumer) and, in the case it becomes depleted, from the Treasury (i.e. the taxpayer).<br /><br />The fund is already in the red and now relying on banks advancing premiums from years in advance. It's very likely that more banks haven't been closed because the FDIC simply can't pay for the bailout.<br /><br />If you read the press releases on most bank failures, the FDIC estimates how much it believes it will lose in each deal. A $200 million asset bank will typically cost around $50-60 million to the insurance fund.<br /><br />Multiply that by the likelihood of most smaller banks failing (if not now, sometime down the line due to competitive pressure) and the problem is large.<br /><br />If it were just the stockholders of the banks losing their investment, well, like you said, to heck with them. The deposit insurance is what changes the game for banks (as opposed to say, restaurants).<br /><br />Eliminate the insurance? Well, that's a whole different discussion.Alex Dalmadyhttps://www.blogger.com/profile/04502544813279011007noreply@blogger.comtag:blogger.com,1999:blog-3011727801882113130.post-71563904396168895492010-03-15T11:44:11.593-04:002010-03-15T11:44:11.593-04:00Why isn’t the market working? Why hasn’t consolida...Why isn’t the market working? Why hasn’t consolidation actually taken place?<br />On the other hand, there are still several very large behemoths whose failure can drag the whole system down with them if they fail (again).<br /><br />Why should the banking sector be different from any other sector in terms of robustness? For example, if a small community bank fails, the system is not affected, but if a behemoth fails, the taxpayer has the pay the bill.<br /><br />Restaurants go broke every day, and nothing happens because the restaurant business is a robust system. Much like nature. <br /><br />If a large very large institution fails, then the taxpayer has to pay the bill and future generations pay for the mistakes of current bank executives.<br /><br />Even of you separate the utility from the casino, no single entity should be big enough to hold the rest of the economy and the government hostage.<br /><br />If there are too many small banks, let it be.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3011727801882113130.post-18362879314122753202010-03-14T16:53:10.349-04:002010-03-14T16:53:10.349-04:00Right now there is little desire or need for the l...Right now there is little desire or need for the large banks to compete with the smaller ones on pricing such as fees. Big Banks have troubles of their own and are trying to generate as much profit as possible to deal with their loan portfolio problems.<br /><br />If you go to the quarterly report I linked, you'll see that -as a group- the large banks were the only ones to log a profit in Q4 of 09. They did it with higher fees (non-interest income) and lower costs (non-interest expenses) than the small guys. <br /><br />So basically, they are more profitable and not passing on the efficiency to the consumer (at least not right now).<br /><br />thanks for reading!Alex Dalmadyhttps://www.blogger.com/profile/04502544813279011007noreply@blogger.comtag:blogger.com,1999:blog-3011727801882113130.post-44327033873416796562010-03-14T15:40:46.586-04:002010-03-14T15:40:46.586-04:00I buy your contention that consumer banking should...I buy your contention that consumer banking should be an industry that benefits from the economies of scale. But in practice it doesn't seem to be that way: the large banks have huge fees; small credit unions and smaller banks tend to have lower fees. Why is that? Why aren't the large banks driving low prices?Anonymoushttps://www.blogger.com/profile/14855693554485036755noreply@blogger.com