It’s quite astounding, once you get outside of the protected big banks, how ugly the rest of the banking sector is looking.
Elizabeth Warren is totally right to be sounding the alarm — plenty of small banks, by virtue of collapsing loan value — are in serious trouble, and need either bailouts or FDIC-backed winddowns. Of course, the FDIC is going broke, and it may be understaffed, just based on the sheer volume of banks that are shutting down.
Check out the footnotes to Regions Financial Corp.’s latest quarterly report, and you’ll see a remarkable disclosure. There, in an easy-to-read chart, the company divulged that the loans on its books as of June 30 were worth $22.8 billion less than what its balance sheet said. The Birmingham, Alabama-based bank’s shareholder equity, by comparison, was just $18.7 billion.
So, if it weren’t for the inflated loan values, Regions’ equity would be less than zero. Meanwhile, the government continues to classify Regions as “well capitalised.”
While disclosures of this sort aren’t new, their frequency is.
That’s not a tiny, little bank. And it’s not the only one having problems. Others like Colonial (CNB) and Guaranty (in Texas) are all in the same direction. Again, not small banks.
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