Will the failure of a small bank in a small community truly impact America? Analysts discount the impact that the expected massive number of bank failures will have on the U.S. economy.

Additionally, analysts also discount the fact that the FDIC fund to cover depositors of failed institutions is close to zero. This fund can be replenished by the FDIC imposing an assessment on remaining banks or, if need be, tapping an emergency line of credit at the U.S. Treasury.

What will be the real impact of bank failures? In my opinion, American consumer confidence and small business owners will bear the brunt of the pain from the bank failures. Why?

>> The reality of further job losses at these banks and those they support within local economies.

>> The psychological impact of seeing small and community banks fail.

>> The lack of credit availability to consumers and small business owners in communities across America.

What are the plans to stem the tide and plug the holes created by bank failures?

1. Have larger banks take over these institutions. What are the risks in this transition? Many of these banks are already filled with underperforming and delinquent loans. The acquiring banks typically want the cheap deposit base of the failed banks and little more.

2. Private equity buyers will have the opportunity to purchase failed banks. What are the risks in this process? The private equity buyers will have to maintain higher capital ratios. Another risk is that the private equity buyers may utilize the cheap deposit base as a pool of liquidity and capital for higher return undertakings than traditional lending in the local communities.

In my opinion, the gap dividing Wall Street and Main Street is only going to grow wider in the midst of these bank failures. The party on Wall Street has little appreciation for this reality on Main Street.

John Kanas, the former chairman and CEO of North Fork Bank, and his private equity firm purchased BankUnited in Florida this past May. Kanas addresses these topics in an interview on CNBC.


  • Faye

    Larry, thanks for this article. Very informative.
    I have a question and would appreciate anyone who is able to answer it. Has anyone heard of Gerald Celente and his Trend Research Institute? Is he legit or is he a conspiracy theorist?

  • Linda C

    Not only is there going to be more bank failures, but stocks in my opinion are rising too fast. There is nothing really to indicate this rapid rise other than more speculation. Companies that are posting profits are at the same time reporting a decline in revenues. Consumer spending rose by o.2 percent, but wages overall remain stagnant. Obviously, some of the thinking that got us into this mess is coming back.

  • Frikken’s Lunch Box

    Great post, LD. Always appreciate your insight. Any suggestions besides keeping our money in the mattress?

    • Jim S

      They want it all. IRS has the records of all that participated in the cash for clunkers program. Sorry folks but that $4500 bucks is considered income and is fully taxable.

  • Pingback: How Will Bank Failures Impact the Economy? : NO QUARTER | kozmom news()

  • tzada

    Follow the Money!

    How do we explain this favoritism? It’s more than the usual liberal bias. It’s all about money. G.E.’s CEO, Jeffrey Immelt is on Obama’s Economic Recovery Advisory Board and is a big supporter of Obama’s economic policy. That’s not surprising since G.E. stands to rake in billions under Obama’s green energy and health care plans.

    And G.E.’s execs aren’t even discrete about it:


    • tzada

      Leaked e-mail shows how GE puts the government to work for GE

  • carolhaka

    Don’t worry! Barbara Boxer has plenty of our money to stimulate the economy, email just received ($18 bucks an hour – woo, woo):

    Dear Friend:

    I am pleased to let you know about an important jobs program that is being funded by the U.S. Environmental Protection Agency and will offer important job training for young people. The $700,000 in funding will be awarded to the Los Angeles Conservation Corps to provide job training for 160 students to learn the latest environmental technologies and prepare them for “green” jobs.

    The trainees will receive extensive training in environmental technologies, hazardous waste health and safety, lead and asbestos abatement, refinery safety, forklift training, and general industry standards. In all, four certifications will be offered. Under previous training programs, people who completed the training had a hiring rate of about 86 percent with average salaries of $18 per hour.

    At a time when many young people are having trouble finding and keeping jobs, this program is offering job training in areas where jobs are likely to expand. I am very pleased that this job training program will be offered in Los Angeles. It will give young people greater opportunities and will help to expand the number of people trained for new, “green” jobs.


    Barbara Boxer
    United States Senator


    • Katmoon

      Nice, I just graduated from college and can’t get a job, but then again its all about location, location, location, and of course I am in the “throw away” age group. Oh, snap, I guess I “missed” my chance.

  • tzada

    Oh goody….

    The weak dollar is pushing energy prices higher


  • Linda Anselmi

    Thanks LD!

    I don’t see how some of these economist talk about us having a floor under us now, when it’s just tissue paper. We haven’t truly solved or changed a thing. Not a thing.

    I keep hearing “worse than the depression” in my head. I hope not. I really, really hope not.

  • Katmoon

    We need a few thousand “Clarence’s” around about right now. Or is that a few million consciences?

    • oowawa

      LOL Katmoon–isn’t it funny how easy it was for Wall Street to get the country to buy into that “too big to fail” stuff as self-evident gospel. Well, if something is “too big to fail,” you cut it up into smaller chunks, right? Instead, they’ve made the “too big to fail” outfits even bigger.

      And Clarence? Nowhere to be found. Maybe he’s been replaced by a Czar of some sort. This sure isn’t Bedford Falls or Mayberry or Kansas anymore. Mr. Smith can’t go to Washington because the too big to fail guys don’t want him there.

      • Obamastolemycountry

        Mr. Smith can’t compete with the almost billion dollar campaigns anymore. The too big guys bought a Government while we were all sleeping and we have awakened to a nightmare. It’s all lalalooneyland now. Is it too late to fix it? That’s what I want to know. Did we miss the chance to stop the hostile Government takeover? I keep saying I will die before I give up my freedoms and they’ll have to pry them from my cold, dead, bloodied hands, but then sometimes I think they already did it! It’s a scary, scary twilight zone world now and I cannot think of any leader that will help us!

  • oowawa

    Well I know what happened when horrible Mr. Potter took over the Bedford Falls Building & Loan after railroading George Bailey: Bedford Falls became Potterville–a grimy city run by greed and graft.

    It’s a wonderful life, but it won’t be if we let “Too Big to Fail” become the motto of the land while the small community enterprises are swallowed whole by the huge predatory sharks engendered by our tax dollars.

  • tzada

    My random thoughts or guesses.

    Of the FDIC there is only about 2 Billion left to cover deposits. One of the men behind the curtain, is known for devaluing currancies, and destablilizing countries, among other things.

    All this news on Main street is bad and I think it will have the effect that is desired. People rightly panic. The regime takes the banks, freezing peoples assets, stopping the American world.

    If people panic and collect their money or not, it won’t make any difference. The plan is to Nationalize the banks, or put them in the hands of only a few selected.

    • maryann

      that man would be George Soros


      the puppeteer of Obama
      (look at Obama he looks so delusion ally self-possessed in his pomposity that he might just float away)

      Oh, and Ofraud just gave Soros $2Bill of our money for his Brazil offshore oil exploration, and Soros profits from bank failures/dollar devaluation

      as if he wasn’t rich enough?

      Soros, a Hungarian Jew, helped the Nazis send off other Jews to extermination camps and apparently helped himself to their valuables…helped him get a foothold in life. He’s a heartless evil POS.

      • Chicago

        don’t forget though that it doesn’t stop with Soros. Soros is merely another puppet himself. read about Soros’ sponsors, the Rothschilds. once you read about them know that the Rothschilds are now moving into the middle east banking industry, which is the last of the few remaining regions with countries that have gold backed currencies.

        every country with gold backed currency that the Rothschilds touch always turns to fiat currency with the gold disappearing into thin air (more like hauled to vaults in Europe owned by the Rothschilds).

        it’s quite an interesting story if you have enough time and patiend to research it.

  • thanks for the update Larry.it doesn’t look good for us..

    • maryann


      The US National Debt now stands at $11.7 Trillion…

      no way can that be paid back, Franks of AZ said it would take 34,000 years, waaaaay after George Jetson’s time

      So, the dollar is dead, Bernanke already said that, BUT WHAT DO WE DO TO HOLD ANY ASSETS? I heard one guy made his platinum into belt buckles…platinum so that the gov;t cannot seize it like they can gold and silver.
      I had a friend whose bank account was held closed as the bank went under, and it took months for his FDIC money to arrive.
      I frankly don’t understand economics other than if you dilute the supply like Obama has done, it’s looking really really bad.
      What to do?