Watch CBS Videos Online

60 Minutes had a good segment this Sunday called Your Bank Has Failed: What Happens Next? which was perfect timing because a number of people seem to be worried about their own banks failing.

I bank at one of the national firms in the headlines and, while the thought has crossed my mind, I still place a lot of faith in FDIC’s handling of the problem. Of course, the fact that FDIC could run out of money is a growing concern. Let’s hope our the message from elected officials doesn’t weaken confidence at a time of growing bank failures.

The clip discusses the too big to fail concept. In most cases, the failure of a small bank has limited if any impact on the depositors in those institutions, but it can wipe out investors in those institutions. Sheila Bair, FDIC chairman and one of the consistent voices of competency in Washington, suggested that lawmakers may consider some sort of cap on size – giving some definitions toward the “too big to fail” concept.

The larger exposure to mortgages over the past decade by most lenders in search of larger profits is a key factor here aside from the recessionary environment.

UPDATE – something I shared last week but thought I’d insert again because it was so good. Think banking, bailouts and “loser mortgagees.” Good grief.

Tags: , , ,

3 Responses to “Bank Failure Is An Option”

  1. michaelDALY says:

    Interesting thought, Jonathan.

    I remember, several months back believing that the whole Lehman, Bear things were not likely or even possible and that “the powers that be” had a good handle on the situation.

    It was kind of like thinking about a plane being flown into a building in the summer of 2001.

    My, how times have changed!

  2. Tony Sena says:

    I think they should let Bank of America and Citi fail. We need to stop spending tax payer money on these banks so they can go out and buy up other smaller banks and raise their fees!

  3. Edd Gillespie says:

    Why did we ever think we couldn’t let ’em fail? They obviously didn’t share the thought and already did it. Just when we had a big ole bunch of rules in place so they wouldn’t shoot themselves in the foot, they got the gun out and did it anyway. I thought we locked the darned thing up and refused to let ’em any where near it after the last time, but then we fell in love with Greenspan and, like everybody else, I got one of those cheap mortgages. But, where is the money going to come from, or is the next economic go round going to use something else? Like the negligent enablers we are, I think we all should pay for this. We saw it coming and and it seems to me a responsible appraisal industry would have shut down. We didn’t. Not only did I take out a spiffy mortgage, I appraised a bunch of stuff for mortgage loans when I suspicioned the borrower was on the ropes. No number hitters though, somebody else did that. And not being responsible for the borrower’s ability to pay won’t carry water. Being our brother’s keeper must be included in our ethics if we are to have professional character.
    At least if you think the guy is going to sink don’t help push him overboard.