FDIC Saw An Increase Of Problem Banks Rise

Daily Market Commentary for May 24, 2011

For Quarter 1 of 2011, Federal Deposit Insurance Corporation [FDIC] saw an increase of problem banks rise to 888 compared to 884 during previous quarter. (read more at Millennium-Traders.Com)
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FDIC Chairman Sheila Bair gave her final press conference and speculated that the nation’s banks are being a little too averse to risk, choosing to put capital in low-risk securities or keep the funds in reserves rather than lending. She added that banks have been running up against a scarcity of creditworthy borrowers. Bair, who has been at the helm of the FDIC through the 2008 crisis and the aftermath during her five-year term, is to leave her post in July, the FDIC announced earlier this month.

During 2010, the FDIC saw 157 insured institutions fail, being the highest number of failed institutions since 1992 when 181 institutions failed. The FDIC deposit insurance fund remained in deficit at negative $1 billion at the end of the quarter but, was down from negative $7.4 billion at the end of 2010. The FDIC deposit insurance fund is used to protect depositors and is separate from the FDIC cash reserves. In comparison, FDIC deposit insurance fund stood at negative $8 billion at the end of Q3 of 2010 and at negative $21 billion at the end of 2009. According to the FDIC, 26 insured institutions with combined assets of $9.8 billion failed during Q1 of 2011 at an estimated cost to the agency’s deposit insurance fund of $1.9 billion.

Comments from Boston Federal Reserve Bank President Eric Rosengren: Improving quantity and quality of bank capital critically important; focus should be on narrow definitions of capital; tangible common equity and tier 1 common better measures; bank stress testing an important supervisory tool; common equity raises at big U.S. banks have bolstered capital level; tangible common ratio now near 6% from 2% crisis level at major U.S. Bank.

Comments from Federal Reserve Governor Elizabeth Duke: Duke paints grim picture for U.S. Consumers; higher gasoline prices hurting U.S. Consumers; many U.S. Incomes can't keep pace with rising costs; Financial Education key to U.S. Economy's Health.

Key stock movement into early afternoon trading session today: American International Group (NYSE: AIG) was down over 1%; Discover Financial Services (NYSE: DFS) was lower by 3%; BlackRock (NYSE: BLK) shares were lower by 1%; Pharmasset (NasdaqGS: VRUS) shares were up 4%; Salesforce.com (NYSE: CRM) shares were higher by 3%; Sina (NasdaqGS: SINA) shares were holding steady after hosting a gain of 1%.

AutoZone (NYSE: AZO) shares were higher by 6% moving into the afternoon trading session after the car-parts retailer reporting stronger sales and improved margins led to a double-digit profit jump.

Yandex (NasdaqGS: YNDX) owner of Russia’s most popular Internet search engine, jumped 40% in Nasdaq Stock Market trading after raising $1.3 billion in an initial public offering that sold above the proposed price range.


Economic data released today:

Redbook: U.S. Retail Sales first 3 Weeks May -2.6% vs. April; U.S. Retail Sales First 3 Weeks May +4.0% vs. May Year-Ago; U.S. Retail Sales +3.4% Week end May 21 vs. Year-Ago.

New Home Sales: Number of U.S. New Homes For Sale falls to record low in April; U.S. March New Home Sales revised to 301K from 300K; U.S. April New Home Sales +7.3% to 323K; Consensus 300K.

Richmond Fed Manufacturing Index: May Retail Revenues Index 3 vs. April 24; May Services Revenues Index 9 vs. April 28; May Manufacturing Shipments Index -13 vs. April 6; May Manufacturing Index -6 vs. April 10.


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