Bank Failures

Every day I take a look at some of the economic news and try to sift through the hype, fear and alarm that the journalists write about.  Today an article on which banks are safe from bank failure caught my eye.

I read it and then started researching on bank failures in the US and thought that I’d only find info about recent banking trouble, but guess what?  The first article I saw was from the BBC and it was about how the US banking system is in trouble, too many bad loans to utility companies, too many credit card defaults, etc… The date of the article?  Jan. 17th, 2001.

The next article I read was about how the number of US Banks that are struggling rose by 30% during the 2nd Qtr of 2008, and… (heres the kicker) the number of banks on the FDIC’s problem list rose from 90 to 117 at the end of June 08… “the highest figure since early 2003“!!!

Back in 2003 who knew that the list of troubled banks had over 100 institutions?  There was no mass hysteria about it.

In the 1980’s the S&L’s went through severe trouble with their loan portfolios, and I remember a lot of  ‘the sky is falling’ talk.

Yes, there are banks in trouble.  Yes, these are hard times for a lot of banks, people and businesses.  But in the end, economic woes and boom times are cyclical.  During the good times, people have the attitude that they’ll never end.  During the bad times people also have the attitude they’ll never end.

But guess what?  They will.  The key is to begin today to prepare so that you will weather the storms and good times equally well.

How do you prepare?  Some cliches come to mind:

Don’t put all your eggs in one basket.

Don’t believe Chicken Little.

During the summer you stash away for the winter.

Ok, I’m off my soap box.  Back to the article I read on which banks are solid.  It was by Jon Markham from MSN Money.

I read through the article and thought it was pretty good in that the fear tactics were kept to a minimum and it provided some good economic data on why it chose 5 banks as being fairly safe from failing.  This doesn’t mean that they are the only banks that are doing ok, but they are doing very well given very poor market conditions.  The reason they’re doing well is that they all have a really good return on equity and are relatively unaffected by a bad loan portfolio.

The banks are:

• Northern Trust from Chicago
• US Bancorp in Minneapolis
• Washington Federal in Seattle
• Charles Schwab Bank in San Francisco
• Bank of Hawaii in Honolulu

This list is meant to provide you with a safe place for your money. If you have a good size chunk of money, maybe you should split it between several of these banks.