The high water mark

The bank industry claims the worst is over:

As the financial crisis of recent years recedes, the FDIC has been predicting that 2010 will be the high-water mark for bank implosions. “Going forward, the FDIC looks to see fewer failures,” agency spokesman Greg Hernandez said.

Some industry observers agreed. “I think we’re over the hump of the problem but far from the end,” banking consultant Bert Ely said. Gary B. Townsend, president of Hill-Townsend Capital, said the industry is not just out of the woods, “we are far beyond the woods.”

By one measure, the trouble is already abating. On average, the banks that failed this year were much smaller than those that failed last year. The banks that failed this year had assets totaling $92.1 billion, a decrease of 45.7 percent from the $169.7 billion in assets of the banks that failed in 2009.

It’s true that the average assets and deposits held by FDIC-seized banks were much smaller in 2010 (157 banks, $587 million assets, $500 million deposits) than either 2009 (140, $1.2 billion, $995 million) or 2008 (25, $14.9 billion, $9.4 billion). Average assets also declined in a similar manner. However, the number of unofficial problem banks has grown from 545 banks at the end of 2009 to 919 now. That represents about 12 percent of all the banks in the country and does not include the four giant banks that are facing enormous putback penalties thanks to the fraudulent unbacked-securities they sold during the housing bubble.

In other words, color me very skeptical.