Bank Failures Today vs. S&L Crisis — Chart of the Day
Kurt Brouwer July 14th, 2008
Source: Calculated Risk
The news on Indymac and other troubled banks is a concern, but a bit of historical perspective is important. During the savings and loan crisis, we saw hundreds of bank failures every year.
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Interesting chart, but I wonder how the chart compares given the significant amount of M&A activity that has occurred in the banking sector over the past 2 decades?
That’s a good question. You’d have to look at combined assets of bank failures today versus back then. This link to the FDIC only goes back to 2000, but you may be able to poke around and go back further: http://www.fdic.gov/bank/individual/failed/banklist.html
You’re missing a more important point which is size. The thrifts that failed in the S&L crisis were tiny. The banks at risk of failing in this crisis are MASSIVE.
Washington Mutual, Wachovia and Citigroup will all be unlikely to survive in their current form
The largest bank failure in history was the Continental Bank failure in 1984. That was just before the S&L crisis really hit. IndyMac was about $32 billion in assets, so that is pretty darn big though. Two more bank failures were announced last week. This current problem is not trivial, but it still pales in comparison to the failures during the S&L crisis, both in terms of numbers and assets. I don’t have the total assets, but something like 3,000 banks failed in the 1980s. Yikes.
Here’s a graph showing bank failures in term os assets.
http://www.bestcashcow.com/the_economy/article/sol_nasisi/how-bank-failures-in-2008-compare-to-tough-times-in-1980s
We are still nowhere near the last crisis.
Based on the chart from bestcashcow.com, it seems that we had several years in the 1980s with $100 billion or more in assets at failed banks. This year, it’s probably $40-50 billion with most of that coming from Indymac’s $32 billion. So, unless Indymac was a precursor of many more large banks that will fail this year, I think it’s safe to say this crisis does not rise to the level of the S&L crisis.