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Banking Crisis Dwarfs Depression





NEW YORK (TheStreet) -- Four more banks went into Federal Deposit Insurance Corp. receivership on Friday, bringing to 81 the total of FDIC actions in 2009. Including FDIC bank closings in 2008, the total for the current financial crisis is now 104. Assets of these 104 banks totaled $146.7 billion. How does this compare with other crises in recent history?

The worst banking crisis since the Great Depression was, until 2008, the savings and loan crisis that spanned 10 years from the 1980s into the 1990s. Total assets involved in that crisis were $519 billion. Adjusting for inflation, using the consumer price index, that is $923 billion in 2009 dollars. That dwarfs the current size of bank failures under the FDIC program in this crisis.

The table below shows the S&L crisis reached a peak in the fourth and fifth years -- 1989 and 1990.

But we haven't finished the second year of this crisis. Only 5.3% of the failures (based on assets) occurred in the first two years of the S&L crisis. We don't know how long the current crisis will continue. We can only hope it doesn't parallel the 10 years of the S&L crisis.

Currently, bank failures handled by the FDIC are only a tiny fraction of the financial institution failures. The totals are much larger if investment banks and so-called shadow banks, including AIG (AIG), Fannie Mae (FNM) and Freddie Mac (FRE), also are included. In addition, two FDIC-insured banks -- Wachovia and Washington Mutual -- were so large that the FDIC couldn't handle the financial and logistic details of standard receivership. In the following table, institutions are defined as "failures" if they have survived to date with substantial or complete government ownership.

Stock quotes in this article: FNM, FRE, AIG 

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