416 US banks in trouble
The US Federal Deposit Insurance Corporation (FDIC), which overseas American banks, says that 416 now fail its stress tests.
While the FDIC will not reveal the identities of the failing banks, it has stated that they have combined assets of $299.8 billion.
The result is the highest since 1994, when 434 banks were on the list, and comes at a time when the FDIC has already spent 40% of its budget closing 81 banks this year.
According to FDIC Chairman Sheila Bair, “While challenges remain, evidence is building that the U.S. economy is starting to grow again.”
“The banking industry, too, can look forward to better times ahead,” she added. “But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry’s bottom line.”
The news comes in the wake of optimism across stock markets, where investors are currently behaving as if the worst financial crisis since the Great Depression will unfold like a normal recession.
While massive government stimulus has helped for some degree of economic recovery – or, better worded, helped prevent economic collapse – the danger is that this has resulted in unsustainable spikes to economic indicators, when in reality we are simply seeing a W-shaped recovery in progress.