FDIC Report Finds Number of Troubled Banks is Growing
The AP reports that new data released by the Federal Deposit Insurance Corp. shows that there are 117 banks in trouble - the highest level in nearly five years.
Federal Deposit Insurance Corp. data released Tuesday show 117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003.
The FDIC also said that federally-insured banks and savings institutions earned $5 billion in the April-June period, down from $36.8 billion a year earlier. The roughly 8,500 banks and thrifts also set aside a record $50.2 billion to cover losses from soured mortgages and other loans in the second quarter.
"Quite frankly, the results were pretty dismal," FDIC Chairman Sheila Bair said at a news conference, but they were not surprising given the housing slump, a worsening economy, and disruptions in financial and credit markets.
The majority of U.S. banks "will be able to weather" the economic and housing storms, with 98 percent of them still holding adequate capital by the regulators' standards, Bair said.
This weak report comes just a week after former IMF chief economist Kenneth Rogoff warned that a major U.S. banks would fail within months. Rogoff warned that, "We're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks."
Last Friday, Kansas-based Columbian Bank and Trust became the ninth bank failure this year. It sounds like we are not out of the woods yet. Here's a video about the bank failures and the new FDIC report.
Reuters reports that U.S. demand for oil fell 800,000 barrels per day (bpd) during the first half of 2008 compared with the same period a year ago. This was the biggest volume decline in 26 years according to the Energy Information Administration (EIA). You can see the EIA's report and outlook here.
In its latest monthly energy forecast, the EIA said the huge drop in demand was due to slower U.S. economic growth and the impact of high petroleum prices.
The drop in U.S. oil demand helped offset a 1.3-million bpd increase in petroleum consumption in nonindustrial countries during the first half of the year.
As a result, preliminary data shows that global oil consumption rose by 500,000 bpd in the six-month period, the EIA said.
The Energy Department's analytical arm sees continued falling oil demand, and for the first time is predicting that U.S. petroleum consumption in 2009 will be lower than this year, which would mark a drop in annual demand for three years straight.
Gas prices have also been falling according to the EIA's website and the AAA's Fuel Gauge Report. However, as the AAA's site indicates gas prices are still over a $1 above prices from a year ago. This means the trend of high gas prices remains high and that so far gas prices are probably just falling because the peak summer driving season has passed.
Fox Business reports in the video below that Wall Street firms are cutting back on perks. They had restaurant entrepreneur Alan Stillman on to discuss how this could impact his business and industry. Stillman said the cuts would be more likely to impact purchases of expensive bottles of wine than decrease restaurant visits.
As expected the Federal Reserve has decided to leave interest rates unchanged. The New York Timesreports that the Fed seemed to back away from its concerns about inflation which is surprising considering how much inflation has been rising over the past twelve months. It could be that lower oil prices are helping to ease the Fed's inflation worries.
Emphasizing the dangers to the economy, the Fed said in its statement that a substantial easing of interest rates in recent months, "combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth."
By a vote of 10 to 1, policy makers declared that inflation remained "of significant concern" - a description that seemed to give less importance to the inflationary risks of keeping rates low than the policy makers had at their meeting on June 25. The lone nay vote came from Richard W. Fisher, president of the Federal Reserve Bank of Dallas, who sought an immediate increase in the federal funds rate, a short-term rate that influences the cost of mortgages, car loans and a host of other consumer credit.
Mr. Fisher has maintained for weeks that the danger of an inflationary spiral warrant a rate increase even at the risk of further slowing a damaged economy.
But in a nod to Mr. Fisher's concerns, the policy makers' statement gave considerable recognition to his point of view that "the upside risks to inflation are also of significant concern."
"Inflation has been high," the statement also said, "spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain."
