After reading through the WSJ's most recent article about failure of IndyMac, I think it became quite clear that the list of banks that are going to fail in the next several months could get very lengthy very quickly...

IndyMac release...

http://www.fdic.gov/news/news/press/2008/pr08057.html

"The fact is that for insured depositors, IndyMac's conversion has been largely a non-event. The more than 200,000 customers of IndyMac with deposits of $18 billion are fully protected. It's important to keep in mind that the small percentage of uninsured are still covered for their insured amounts and half of their uninsured money. As assets of IndyMac are sold, they may receive even more. They have had continued access to their funds through ATMs, debit cards, and writing checks over the weekend, and on Monday morning, it will be business as usual"

The worrying part is that depositors have only received half of their money above the $100K limit so far... I think it is quite possible we might see several runs on the smaller banks in the next few weeks and might even see things get really ugly for a large bank or two...

Quote from the WSJ article

Some industry officials say large depositors are increasingly likely to yank their money out of struggling institutions. "Consumers believe that there is an implicit guarantee from the government that the large banks aren't going to fail. When they look at the smaller banks, they have less comfort that is going to be the case," said Aaron Fine, a partner in the retail-banking practice at consulting firm Oliver Wyman in New York.

As a result, some customers are moving their money to larger banks, he said, noting that the first-quarter deposit based increased by 6% from the fourth quarter of 2007 at banks with more than $10 billion in deposits. Deposits at small banks grew by just 2%.

Bankers say that local businesses and municipalities, which often stash hundreds of thousands of dollars at a single bank, are likely to shift some or all of their funds out of institutions that are perceived as especially risky. Small and midsize banks are most vulnerable to losing a few big depositors, but larger banks that are struggling can also feel the pinch.

In the meantime, the FDIC will bear the bulk of the financial burden of IndyMac's failure, predicting that its collapse will cost the deposit-insurance fund between $4 billion and $8 billion, possibly making it the costliest bank failure ever. If an expected surge in bank failures materializes, other financial institutions, which pay assessments to the FDIC to capitalize the fund, may be forced to provide the agency with more money.

I am worried that even if we get a rally tomorrow because of the FNM and FRE bailout, things might get worse as the week progresses...

List of banks that failed in the current cycle :

Bank Name Closing Date Updated Date
IndyMac Bank, Pasadena, CA July 11, 2008 July 11, 2008
First Integrity Bank, NA, Staples, MN May 30, 2008 May 30, 2008
ANB Financial, NA, Bentonville, AR May 9, 2008 May 9, 2008
Hume Bank, Hume, MO March 7, 2008 July 1, 2008
Douglass National Bank, Kansas City, MO January 25, 2008 June 17, 2008
Miami Valley Bank, Lakeview, OH October 4, 2007 April 28, 2008
NetBank, Alpharetta, GA September 28, 2007 April 28, 2008
Metropolitan Savings Bank, Pittsburgh, PA February 2, 2007 April 28, 2008

Stay safe,
skepticalcapitalist@gmail.com