Say Anything Blog

The FDIC is hiring more staff in preparation for further failures and has upped its list of troubled banks to 90.

Over the past weeks, MSCI’s main world equity index and U.S. indexes have joined European and Japanese counterparts in bear market territory, falling at least 20 percent from recent cycle peaks as investors fret about the drag on growth from escalating oil prices and the abrupt withdrawal of credit from indebted consumers.

U.S. banks were at the centre of the credit and housing bubbles that burst last year, combining with a surge in commodity prices to end the long run of not too hot inflation and not too cold growth that was dubbed the Goldilocks economy.

As more news of mortgage defaults came in last week, those bank shares sank to record lows, according to the S&P bank index , and they could slide further if the banks unveil more bad news in their earnings reports this week.

“The high level of leverage extended to both consumers and investors against a now depreciating asset alongside lax lending standards make a rise in default rates beyond all previous experience likely in most major Anglo-Saxon economies,” said Steven Pearson, chief strategist at Bank of Scotland Treasury.

“The epicentre of the crisis therefore shifts from investment to commercial bank balance sheets.”