Financial Answers "IN SIMPLE LANGUAGE"

We have been hearing more and more about how the economy is turning around and things are getting better.  Now I don’t want to be the purveyor of bad news but there are things that you need to be aware of.

Maybe the economy is turning around in some areas but in others it is as bad as or worse than we thought.  Case in point is that many banks are still having a difficult time staying in business.  Last year, 2009, an estimated 140 banks had to be closed.  So far this year, 2010, 15 banks have failed.  That just doesn’t sound like things are turning around.

Some of these banks are of significant size.  The Los Angeles based First Regional Bank failed with almost $2 billion in deposits and approximately $2.2 billion of assets.  Not exactly a small country bank.  This will potentially cost the Federal Deposit Insurance Corporation (FDIC) around $825 million in insurance to protect the depositors.

Besides California, several banks have failed in Georgia, Florida, Washington, and one bank in Minnesota.  What’s troubling about the two bank failures in Georgia is the fact that last year, 2009, Georgia had 25 bank failures the highest in the nation.  I haven’t found any evidence to explain why Georgia is having so many bank problems.

This is important for you and me to know because the FDIC continues to raise the cost of the premium our banks pay to cover the cost of the insurance that protects our deposits.  This FDIC insurance cost, like everything else in business, is passed along to us in the form of new banking fees and/or higher banking fees.  That is the capitalistic way of doing business.

Since we are all aware that unemployment is still hovering a little over 10% based on Washington, D.C. estimates…although anyone with any sense knows that it is probably double that when you factor in the people who don’t collect unemployment benefits anymore and have given up looking for a job.

In 2008, we only had 25 bank failures and in 2007 we only had three.  Unfortunately the number of bank failures is predicted to continue to go up in 2010.  I am still wondering why the government keeps telling us that things “are” better and getting better. Do you know of “anyone” who feels like things are getting better?   I believe that they will get better but not for at least another year or two.

Another Big Hit is coming Our Way

What I am more concerned about is the lack of information and discussion about the pending tsunami that is currently heading our way.  I have not heard much talk about the $500 billion of commercial real estate loans that are coming due in the next several years.  I think we all see the empty stores, shopping malls, and office buildings all around us. 

Those commercial properties still have mortgages on them and must meet their payments on their loans just like everyone else.  That is extremely hard to do for any extended period of time when the commercial property is vacant with no rental income coming in.

Also the credit card crunch may be right around the corner when millions of Americans can’t continue to make even the minimum payment on their credit card debt.  Sorry folks but we are not out of the woods yet.

So again not to sound like a doomsayer but rather a realist, you need to “really’ know what is going on so you can prepare and protect yourself.  I just wish the United States government would stop treating its citizens like naïve children and let us know what is truly going on.  I don’t know about you but I am a big boy and can handle the truth.

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