Failed bank chart

The final tally is in.  140 banks failed in 2009.  And as of last Friday, another 15 have already been taken down by the FDIC in January 2010.  This truly is unprecedented.  Here's a quick crash course on how this happens:

  • The FDIC monitors the health of banks very carefully.  They must maintain certain good vs. bad loan ratios.  They must have a certain amount of cash liquid on hand in every branch at all times.
  • If their bad loan rate gets too high, or if other health ratios get out-of-whack, the FDIC will put them on warning that they need to fix the problem soon or face closure.  This all goes back to the FDIC guaranteeing deposits to keep the faith of the US citizen in the banking economy.
  • If it goes too far the FDIC will step in and take over the bank.  They will sell the (good) deposits to a healthy bank.  They'll take the bad loans and sell them off (usually in bulk pools) to investors and other banks.

This is where Lake City sees opportunity.  Buying real estate assets from struggling banks, or directly from the FDIC after they take over a bank, can lead to some amazing deals for the opportunistic investor.

THERE IS OPPORTUNITY IN CHAOS