The government is here to save you.
Regulators shut banks in Calif., Ill., Fla., Texas, putting US bank failures at 20 for year
Regulators shut four banks from California to Florida on Friday, boosting to 20 the number of U.S. bank failures this year following the 140 closures last year in the worst financial climate in decades.
As the economy has weakened, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have accelerated and sapped billions of dollars out of the federal deposit insurance fund. It fell into the red last year.
The 140 bank failures last year were the highest annual tally since 1992, at the height of the savings and loan crisis. They cost the insurance fund more than $30 billion. There were 25 bank failures in 2008 and just three in 2007.
If the economic recovery falters, defaults on the high-risk loans could spike. Many regional banks hold large concentrations of these loans. Banks face as much as $300 billion in losses on loans made for commercial property and development, according to a report issued last week by the Congressional Oversight Panel, which monitors the government's efforts to stabilize the financial system.
Hundreds of banks, including major Wall Street institutions, received taxpayer support through that politically unpopular rescue program, enacted by Congress in October 2008 at the height of the financial crisis.
Are U.S. Bonds Really Safe?
Saving for retirement? Putting money away for your kid’s college education? Instead of U.S. Treasury bonds, you might want to take a look at Kazakhstan, Estonia or maybe the Czech Republic as safe havens for your money.
According to Credit Suisse (CS: 43.84, -0.62, -1.39%), those three countries rank higher than the United States in the safety of their debt.
In rating the risk of sovereign debt, Credit Suisse said Iceland topped the list as the most risky, and Greece, which has dominated headlines in the past two weeks as it slips toward potential default, ranked second. The other four so called “PIIGS” nations - Italy, Ireland, Portugal and Spain - also appear in the top 15.
But what has some in debt circles buzzing is the United State’s position as the 16th riskiest nation, just behind Italy.
Britain and the PIGS
As of today, the British government must pay a higher interest rate to borrow money for ten years than either the Italian or the Spanish governments, despite the extraordinary ructions going on within the eurozone.
Eurosceptics should resist any Schadenfreude over the unfolding EMU drama in Greece. (Not to mention the huge exposure of British banks to Club Med). The Greek crisis is a dress rehearsal for attacks on any sovereign state with public accounts in disarray.
While Britain went in to this crisis with a much lower public debt than Greece or Italy (though higher total debt than either), it now has the highest budget deficit in the OECD rich club — and perhaps the world — at 13pc of GDP.
I have a very nasty feeling that markets are about to pounce on Britain. All they are waiting for is a trigger, perhaps a poll prediction of a hung-Parliament or further hints that Tories dare not confront the beneficiaries of state spending.
David Cameron views the NHS as sacrosanct, but that is precisely what must be cut. It is anachronistic that you cannot obtain prescription drugs without going through a doctor — wasting everybody’s time — as if doctors these days reach a better decision in two minutes than well-informed patients with an acute self-interest in getting the matter right. It is precisely this edifice that needs to be hacked down with a machete in a revolutionary rethink about the functions of the state.
China Will Keep Trimming Treasurys
On Tuesday, government figures showed that foreign demand for Treasurys fell by the largest amount on record in December.
China cut its holdings by $34.2 billion to $755.4 billion, losing the top spot in terms of foreign ownership of Treasurys to Japan.
Japan also cut exposure, cutting ownership of Treasurys by $11.5 billion to $768.8 billion, a much slower pace than China.
"I am surprised China has not dropped more," Rogers told CNBC.com.
Asked if the US should be worried about this trend, Rogers, who does not hold US Treasurys, said: "Of course. The US should be worried about everyone lightening up – not just China."
The cut in foreign holdings could force the government to make higher interest-rate payments, just as it is struggling with big budget deficits.
Asked if the trend of unloading US government debt was likely to continue, Rogers said: "Probably after this euro scare is over – which may take a good while."
Your "leaders" are here to help, so buckle-up people. Buckle-up!
