Great, publicizing information like this is likely to cause runs on those banks, which will just make them more likely to fail....

IndyBank, the one in California that just failed, had a "Texas-ratio" of somewhere in the 50's, so that should just go to show that these sorts of lists aren't all they're cracked up to be.

i hope that releasing a list like this doesnt induce panic and cause people to withdraw their money from these banks... causing the failure that may not have ever happened in the first place.

Strictly speaking most banks only go under when some media outlet puts their name on a list of struggling banks which causes people to all withdrawn their money at the same time.

*snap*

Wow...even with the loss due to inflation, putting my money under the mattress seems better and better every day.

I'd want to know if my bank were that mismanaged. Seriously, these banks are going to go under because of their loan practices, not because of being "outed" online.

Why is it called the 'Texas Ratio'?

Because it's god-awful hot?

What is the banking industries obssesion with putting the word "first" in their name. There's like 5 in my area alone claiming to be "first blah bank and blah"...

/end rant

FDIC only insures the first $100,000 per account which is why it's a good idea to have multiple accounts if you have more money than that.

Of course the FDIC only works if the federal government doesn't go completely broke (collapses). With the amount of money the U.S. is spending on wars, financial bailouts, stimulus packages, etc, the U.S. is going to start need to borrow more and more money from other countries. So basically your bank account is insured by China.

Isn't there a way to play against the system when you know a bank is going under??

Perhaps... sell short and buy back when the bank is hosed?

@snazz: It's funny didn't they just run a post about a bank run?

@Morac: Don't post that! The last thing we need is a run on the fed!

Seriously, these lists are about as financially useful as divinig rods. There are a lot of ways to move investments on and off of balance sheets to skew these ratios one way or another. It looks good under a "BRIAN HAMMONDS EXCLUSIVE" banner though.

CNN's breaking headline is Wachovia's headquarters being raided :/

@Morac: actually FDIC insurance is more complicated than just "number of accounts." it probably has next to nothing to do with it actually. it's account holders, account TYPES, and beneficiaries that play a role in what determines coverage. FDIC.gov has a great tool to calculate your coverage.

and yeah. the FDIC doesn't publish lists like this to avoid runs on the bank. most people don't ever know they're bank is being sold or closed until the day of.

Unfortunately, this is only a ratio without a quantifier of just how much money was/is involved. Indymac had huge dollar signs involved even if their exposure was on a ratio of 50. 50% of $14 billion is STILL $7 billion...

For anyone saying "Ohh, you'll cause a run on that bank", I bet you would have a very different reaction if the bank where you kept your money were on that list.

We would hear a swooshing sound, and then the wham of your screen door closing.

Seriously, folks should pay attention to these lists as well as the FDIC insurance rules. People really lost money in the Indybank closure.

Wait, there are Americans who have money in the bank?
Last time I checked, the average American had NEGATIVE savings. Are they putting their money into checking accounts rather than savings?

@snoop-blog: My wife agrees completely with you. She refuses to do business with a bank that has the word "First" in their name.

@savvy999: Because the S&L crisis in the 80s was centered around Texas.

@Landru: Maybe they're saying "don't post that list" as they're running out the door.

This list and the accompanying article have been available on abcnews.com for at least two days. I read it earlier this week and thought, "goodness, won't publishing this lead to a run on those banks?"

Apparently not.

That said, it is pretty horrifying when something you're connected with starts showing up in the news. In the last ten minutes articles have shown up about a raid on Wachovia Securities and although I know that's separate from the ordinary banking half of Wachovia where my boyfriend does all his banking, it's still pretty scary.

(Mine is Bank of America. They may be pure evil but at least they still seem solvent for the time being.)

I'm a little confused. My local news said Wachovia was next on the list of potentially flopping. All of the invoices and payments to our vendors as well as paychecks from my company are cut through Wachovia (or direct-deposited) which means with over 500 employees and several million dollar paper checks going out the door, they have to be holding more than $100,000 in their account. (Big duh on that one) I'm completely ignorant about stuff like this so what, if anything, does that mean for me if Wachovia were to pull an IndyMac moment? Does it only apply to savings accounts? Would this affect our business? My paycheck? Again, I'm dumb about this, so please don't slaughter me in the comments.

@snoop-blog: @ColoradoShark: Down South, in God's country, it's so banks can have dual operations. For instance "First Baptist Church and Bank and Trust of Texas." And the commercials have people in cowboy hats, because you can always trust people in cowboy hats with your money.

Luckily, my bank is a larger operation and is not on this list.

You gots to diversifies with yo monies...

What happens to the outstanding loans when these banks fail? Sorry, never did any research on that. Do they get sold off to other banks/collection agencies (or FDIC) to deal with that or is there something else?

@EtoilePB: if Consumerist really could start a run on a bank, BofA would have been gone a while ago.

To everyone who thinks it is a bad idea to publish the list: Are you farking kidding me?

Cosmo: Posit: People think a bank might be financially shaky.
Martin Bishop: Consequence: People start to withdraw their money.
Cosmo: Result: Pretty soon it is financially shaky.
Martin Bishop: Conclusion: You can make banks fail.
Cosmo: Bzzt. I've already done that. Maybe you've heard about a few? Think bigger.
Martin Bishop: Stock market?
Cosmo: Yes.
Martin Bishop: Currency market?
Cosmo: Yes.
Martin Bishop: Commodities market?
Cosmo: Yes.
Martin Bishop: Small countries?

@backbroken: wrong site.

The Texas Ratio is named when comparing the bad loan ratio of texas banks in the early 80's recession, although similar results were found when they (RBC) studied New England area banks as well.

In general I'm all for consumer awareness, but then again, most consumers have not learned the lessons of '29. Run on banks baaad.

/owned

Why would anyone keep 100K in a savings account which at best would keep up with the rate of inflation? sure it's "safe" in so much as you'll always have a 100k, but what happens when that 100K becomes worth 10K in today's dollars? Even being in my mid 20's I remember when you could get a gallon of gas, a cup of coffee and a 2L of soda for under a dollar.

Inflation is an invisible tax that reduces your purchasing power. Seriously, when did our money become worth less than Canada's? (No offense to Canada)

Sadly, I think we'll never learn the lessons of '29. I just read that IndyMac's ex-customers withdrew in excess of $1.3 BILLION(!). What bank can survive if knuckleheads don't understand the FDIC insures all deposits up to $100,00?

A run on a bank is only bad for the consumers who aren't first to withdraw their money.

A run on a bank is a "tragedy of the commons" scenario. Great idea for the individual. Bad idea on the whole.

@IphtashuFitz: Then suggesting that my local credit union will likely be the last bank standing would result in a rush of new depositors.

@Landru: Yes, people lost money at Indybank because they are complete morons and decided to put more than $100,000 in any one account. You can have multiple deposit accounts that are each insured up to $100,000. Personally, I hope the FDIC doesn't decide to bail out anyone over the $100,000 - people knew the risk but decided to bet against it and now they'll pay the price. Don't be retarded.

@savvy999: Probably because it's where the really BIG failures originate?

@LINIS: if you had two accounts at IndyMac you would only be insured up to $100,000 total. you would need to open up an account in another FDIC insured bank to be insured for another $100,000. But, yes, people who leave more than $100,000 in an account are stupid.

@chiieddy: Phil Gramm, yes?

[www.salon.com]

[www.bitsofnews.com]

To be honest with you, I wouldn't be suprised to see the ING Direct go under (the ING Bank in the United States). They pay great interest, but at the same time, charge next to nothing in fees to their customers.

I overdraft occasionally, and they never charge a fee besides a few few cents for interest (never more than a dollar). They must save a ton of money by not having branches, but again, I wouldn't be surprised in the least, which is why I made sure it is FDIC insured like a regular bank.

@Ilikenumbers: Knowing that the FDIC will somehow guarantee that your money isn't lost forever is not the same as knowing that your rent / mortgage check (electric bill, college tuition, etc) will be duly paid and processed from your account into the recipient's.

I like to hope that if my bank should go under, I'd (a) be able calmly and rationally to call people / agencies to whom I owe money and explain the situation and (b) be understood and accommodated in case my payments stopped flowing properly, but... well, you read Consumerist. What do you think the chances are of the individual not getting screwed?

@MissTicklebritches: Ha! So true.

@MissTicklebritches: THIS. The idea that potential business failures should be some kind of state secret evokes images of Soviet Russia and the Third Reich, not to mention today's mainland China. Next thing to be not discussed (or else, you traitor) will be what, air quality ratings? Crime rates? School dropout rates? Like you, I WANT to be warned about this kind of stuff, that is, provided it's real, and not some kind of Chicken Little homeland security color chart crapola.

Sorry... but did that say the "State Bank of Lebo"??? Unless this is a WoW in-game bank, the name alone is a good reason it should be taken out back and mercifully shot dead. Seriously: imagine the developers of Grand Theft Auto having a brain-storming session creating names of fictional business based on real-world counterparts. If someone had suggested "The State Bank of Lebo" they all would have had a good laugh and gotten on to developing names people would actually take seriously. "Lebo of the Lost"

@smonkey: b/c banks are "safe" (as in, you can't lose your money) vs. stocks/mutual funds that could lose money.

yeeeeaaaah...well, so much for that idea.

the truth is, most people are very uneducated when it comes to money. i know quite a few middle-aged folks that blew out their stock investments back in 2001 when the stock market took a serious dive. i kept trying to explain that it wasn't such a great idea back then, but most people explained "but my stocks lost 1/2 their value overnite!"

this is why people think banks are "safe". they deposit $10,000 & they have $10,000 (plus some nominal interest earned). much "safer" than buying $10,000 in stock & seeing that it's worth $7,000 in a week's time.

@trogam:

When economists talk about a negative savings rate, they aren't referring just to your 0.75% savings account. Savings goes up when you deposit money or pay off debt (like credit cards), with the converse being true as well.

By increasing credit card debt faster than one's savings credit, one (in fact, many) people end up with a negative savings rate even though they have more cash in the bank than before.

@snoop-blog:

What is the banking industries obssesion with putting the word "first" in their name. There's like 5 in my area alone claiming to be "first blah bank and blah"...

/end rant

@InfiniTrent:
We have Fifth Third Bank here in Lexington. Weirdest. Name. Ever. What does that even mean?!?

I do believe that is at top-heavy fraction.

@InfiniTrent: It's a result of the merger between Fifth National Bank and Third National Bank. Ha! Truth is stranger than fiction.

@snazz: Wrong, some retirement accounts and POD accounts are insured for much more, so it's not "stupid" to have a $200,000 IRA in an account at one bank.