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Recession Deepens Amid Banking Decline

Published 08/25/08 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

Banks across the United States saw their market values decline as financial woes continued to rock the industry, according to Bloomberg.

The decline was driven in part by the collapse of Columbian Bank and Trust Co. of Topeka, Kansas, under of the weight of its own poor real-estate investment and sub-prime loans. Following news of this bank failure – the ninth such failure in the U.S. this year – shares at Bank of America Corp., and JPMorgan Chase & Co. fell 1 percent each.

With the closure of Columbia Bank the FDIC has now locked the doors of 37 U.S. banks since 2000. The list of troubled banks also grew to include 90 banks with $26.3 billion in assets and holdings. Bank closures in the United States have accelerated significantly in the past year. By comparison, there were only three closings in 2007, and no federally insured banks were forced to close in 2005 or 2006.

Trouble continued on other fronts as well; The S&P 500, Dow Jones, Nasdaq and NYSE have all retreated. The market decline was not solely driven by banking struggles – oil futures also rose. With an estimated $500 billion in losses this year alone, the finance houses are doing their part to hinder any possible recovery.

The credit crisis seems to have much further to go before running its course, and we may expect more tumult in the housing and banking industries as well as other markets.

Source Bloomberg:

The Standard & Poor's 500 Index dropped 7.38, or 0.6 percent, to 1,284.81 as of 9:35 a.m. in New York. The Dow Jones Industrial Average slid 79.06, or 0.7 percent, to 11,549. The Nasdaq Composite Index decreased 18.71 to 2,396. Four stocks retreated for each that rose on the New York Stock Exchange.

…

The S&P 500 extended its first weekly decline since July. The benchmark for American equities slipped 0.5 percent last week as energy prices climbed and concern grew that the government may need to bail out Fannie Mae and Freddie Mac.

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