Bank Finance India: American banks

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Monday, March 22, 2010

Avoid bailout of financial firms, says Bernanke

Source:Bloomberg / March 21, 2010, 0:17 IST

Federal Reserve Chairman Ben S Bernanke said government
bailouts of large financial firms were “unconscionable” and must
be ended as part of a regulatory overhaul following the worst
financial crisis since the 1930s.

“It is unconscionable that the fate of the world economy should
be so closely tied to the fortunes of a relatively small number of giant
financial firms,” Bernanke said today in a speech in Orlando, Florida.
“If we achieve nothing else in the wake of the crisis, we must ensure
that we never again face such a situation.”

Congress is considering a resolution mechanism for financial firms
that are so large or interconnected to other institutions that their failure
could damage the financial system. A plan by Senate Banking Committee
Chairman Christopher Dodd, a Connecticut Democrat, would allow
the Federal Deposit Insurance Corp to liquidate a large firm after a panel
of bankruptcy judges determines the company is insolvent and with approval
of the Fed, FDIC and the Treasury Department.

The Fed chairman has faced criticism from Congress for bailouts
that he said were intended to prevent a possible depression.
Lawmakers including Dodd have criticized the Fed’s purchase of $29 billion
of securities in March 2008 to facilitate the merger of Bear Stearns Cos
with JPMorgan Chase & Co, and loans to keep American International Group
Inc from default.

All large financial firms rather than just big banks should be subject
to stronger regulation, Bernanke told bankers gathered for the
Independent Community Bankers of America convention.
Shareholders and creditors should not be protected from losses
in any plan, he said.

The Fed is revamping its approach to supervision of large banks,
using economists and quantitative analysts to help with horizontal
reviews targeting risks across the financial system, Bernanke said.

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Seven US banks bite the dust in a day

SOURCE: PTI Mar 21 2010 , New York
A staggering 37 American banks have
folded up in 2010, or an average of
12 entities going bust every month.

The US has seen 15 bank failures,
out of which seven collapsed on March 19 alone.

Despite signs of economic recovery, high unemployment
levels are resulting in increased defaults, in turn severely hitting
the small and medium banks.

The seven entities that collapsed are State Bank of Aurora,
First Lowndes Bank, Bank of Hiawassee, Appalachian Community Bank,
Advanta Bank Corp, Century Security Bank and American National Bank.

Going by the Federal Deposit Insurance Corporation, the failure
of seven banks would cost the agency as much as USD 1.28 billion.
The FDIC insures deposits at more than 8,000 banks and also acts as
a caretaker of failed entities.

Indicating the severity of the financial crisis, a whopping 191 banks
have been closed down by the authorities since the fall of Wall
Street major Lehman Brothers in September 2008.

Last month, seven banks failed while the tally stood at 15 in January.
The US economy grew at over 5 per cent in the December
quarter but unemployment rate continues to be more than 9 per cent.

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