Banks Strain as Capital Drains

Hope for regulatory assistance

Sydney Garmong, a partner with Crowe Horwath LLP, a top-10 public-accounting and consulting firm, said the Emergency Economic Stabilization Act of 2008 (also known as the $700 billion bailout) left open the possibility of the Treasury offering assistance to banks and thrifts with less than $1 billion in assets that slipped to undercapitalized because of losses from Fannie and Freddie preferred stock.

This offers hope to National Bank of Commerce, Berkshire Bank, State of Franklin Savings Bank and other undercapitalized institutions that took significant losses on GSE preferred shares. They also must meet other qualifications such as serving "low- and moderate-income populations and other underserved communities."

Bank and thrift ratings

As we see in the third-quarter numbers, loan quality isn't the only threat to banks and thrifts. Many banks that maintained good loan quality were hurt by investments that were previously considered rock-solid. The pace of failures is accelerating, so it's important to keep an eye on the safety of your bank or savings-and-loan institution. TheStreet.com Ratings provides objective, conservative financial strength ratings for all U.S. banks and thrifts.

While the FDIC has temporarily raised deposit insurance limits, it is still a good idea to check out your institution's rating, and ask some questions if the rating is below a C- (Fair Financial Strength).

It is also important to consider that you or someone you know may be affiliated with a business or municipal depositor (such as a school district) that keeps large uninsured balances in a local institution. P/>Financial Strength Ratings on each of the nation's 8,600 banks and savings and loans are available at no charge on the Banks & Thrifts Screener. In addition, the Financial Strength Ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the Insurers & HMOs Screener.