Do You Expect More Banks to Go South? Plenty ofpeople and species migrate, but a massive 83% of our GlobeSt.comreaders see more banks going south. Unfortunately, it's not theweather driving them there. A few months ago, Bear Stearns had itswell-known troubles and now others banks are looking shaky.Granted, 17% don't believe more banks will fold, but let's hope theworst is behind us. As grim as the news is, Eric Anton, executivemanaging director at Eastern Consolidated, told GlobeSt.com thatwhile things are going to be bad, some good will come out of thesesituations.

|

"There's no question that more banks will fail. We're halfwaythrough 2008 and about five banks have failed nationally. They dida study about 15 years ago during the last recession, showing thatthe rates of banks closing was a much higher number than what wesee now. We're in pretty good shape compared to the 1992-1994 timeframe, but certainly more banks will go out. Even in the best oftimes you have certain banks that make bad decisions and go out.The numbers don't surprise me at all.

|

"The smaller regional banks seem to have made mistakes buyingall kinds of investments that were illiquid, mortgage-basedsecurities, etc. I don't think it's the subprime that's killingthese banks. It was investing in other things where they didn'tknow what they were buying: CMBS pieces and commercial loans thatturned bad. A couple big commercial loans can really wipe out asmaller bank. We may see one of the big guys go down. There couldbe another Bear Stearns lurking out there. You never until it's toolate.

|

"We're a capitalist society. We're meant to fail. Certainbusinesses are meant to fail and good things come from the abilityto fail. The worst-case scenario is the government tries to solveall these problems and burdens the taxpayer with saving these banksthat made bad decisions and made bad investments. If that's thecase, whether it's the state government or the federal governmenttrying to bail out every lender that goes bankrupt, then otherbanks will say 'I can only succeed because if I made a bad loansthey'll bail me out and if they turn out to be good I'll make a lotof money.' The good is that the capitalist system works. Making baddecisions results in a penalty. It would be a mistake for thegovernment to try and solve all these different issues. Wall Streetneeds to learn a lesson that everything doesn't go up forever.

|

"If we're in a down period, we're in a down period. They call ita recession because things recede. There's oversupply, too muchproduct, too much capacity, so the economy needs to take a breakand a breath. Unfortunately that means layoffs, firings andstress.

|

"Is there anything that's going to pull us out? Nobody knows.The smartest guys in New York and everywhere else, nobody knows.Oil is hurting the economy, but now the prices are coming down sothat's good news. Will technology or the green effort create newjobs? Nobody knows.

|

"It's not a perfectly rosy picture. We're not going to bounceout of this so fast. The past four to nine years were a boom time.So there was real overcapacity, overbuilding and overpricing."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.