FDIC Adds Staff in Anticipation of Increased Bank Failures

February 26th, 2008 · No Comments · Subscribe to this feed

The FDIC is looking to bring back up to 25 retired veterans of the Savings and Loan crisis in preparation for a future increase in failed financial institutions. According to Jaret Seiberg, Washington policy analyst for Standford group, “Regulators are bracing for well over 100 bank failures in the next 12 to 24 months”. He then goes on to mention the failures will likely be concentrated in markets suffering severe housing problems like Califonia, Florida, and Georgia.

Housing-market problems in Georgia?

The mention of Georgia came as a surprise to me. Living and owning real estate in Atlanta, I’m fairly well-versed in the local real estate market. Sure, some neighborhoods are experiencing rising foreclosures but those neighborhoods are isolated and are almost exclusively lower-income parts of the city. For the most part, prices are holding up well despite above-average inventory. At worst, the Atlanta market will see perhaps 2 or 3 years of no appreciation as inventory surpluses work their way out of the system. By all accounts, my property has even appreciated slightly over the past year judging from rents and recent comparable sales. While there are certainly other major markets in Georgia, I haven’t heard anything dire out of them. Sure, prices may be down slightly and foreclosures may be up slightly, but it’s hardly a crisis. This makes me wonder just how in-tune these government agencies are with reality.

It’s Always Best to be Prepared

Doubts aside, it’s always better to be safe than sorry. Bringing back experienced FDIC managers who have been there before can be nothing but a good thing. But to put things into perspective, only 65 banks have been labeled by the FDIC as “problem institutions”. That may seem like a lot, but contrast that with the 572 “problem” banks in 1993 in the middle of that far more severe bank crisis.

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